Questions still remain:
- if merely a passive investor, is the 25k offset to ordinary income available? if so, is it captured in TT or do I have to do something on my own to adjust the return to reflect this benefit?
TT does handle the situation you describe. the $25,000 is only available for passive real estate activities. TP must actively participate and have a modified adjusted gross income of less than $150,000. passive losses (after taking into account any passive losses limited by basis or at risk limits) first flow to form 8582 and then the calculations are made on that form and allowable losses flow to schedule 1
- are there any options at this point in 2020 to income shift backwards into 2019 to take advantage of the released PALs tax benefit?
would think not since any 2020 activity would be reported on 2020 return. there is an exception should you have an NOL but then the CARES Act requires a 5 year carryback of NOL and then carryforward.
- is there a way to look at capital accounts and current year disposals to guestimate potential PAL releases resulting from such activity?
if you dispose of an activity in 2020, the PAL suspended losses are allowed (per IRS these are reported in the passive loss column (g) on schedule E while the current year loss or income gets reported as non-passive in column i or k. these losses do not flow to form 8582
- still unclear about released PALS relative to realized capital gains from disposal. would have thought PALs would first be applied to any passive investment capital gains before taken as negative income above the line. by corollary, would have thought passive investment capital gains would be offset by PALs before being offset by any capital loss carryforwards arising from capital market or other non-passive investments.
capital gains from the disposal of the underlying partnership assets are reported on lines 8 or 9a and are not passive but are portfolio income. thus the capital gains flow to schedule d and the ordinary losses flow to schedule E. passive capital gains also retain their character even if there are passive losses. they are supposed to be reported on line 11i line 3 or 4
so if you have a current year $500,000 passive capital gain and passive ordinary loss of $500,000 and a $100,000 PAL carryover. if no disposal these items flow to form 8582. the $500,000 gain flows to 8949 which flows to schedule D and an allowed $500,000 current year PAL that flows to schedule E. so you end up with a $100,000 PAL carryover. full disposal the 8582 disappears.
if you had a $200,000 passive capital gain and PAL's as described above. only $200,000 of ordinary PALS would be allowed unless complete disposal. if the capital gain wasn't passive and there was no disposal the capital gain would be reported and PALs would be limited.
