I have a residential rental that has a loss and now have commercial self rental that has a gain. I need to keep the residential losses from being able to offset the commercial self rental gain.
Not possible and not legal on a personal 1040 tax return. Period. So the bottom line is, your losses on one will offset the gains on the other.
Won't work if you put the commercial property in an S-Corp either. For the commercial property you would have to create an LLC and file 2553 to have that LLC "treated like an S-Corp" for tax purposes. Or just skip all that crap and create an S-Corp. Then if your mortgage holder on the property will allow it (I seriously doubt they will) you transfer property ownership to the S-Corp. Then the S-Corp will file it's own physically separate 1120-S Corporate return reporting all rental income/expenses on SCH E as a physical part of the 1120-S Corporate return.
The only problem with that, is that since the S-Corp will issue you a K-1 showing passive gains, and those gains will be included on page 2 of your 1040 SCH E. Those passive losses will "still" offset the gains since it's all passive, no matter what.
So you're spinning your wheels here.
