@DianeW777 Thank you. So since the PAL losses may not be written off in the year of disposition if I am excluding capital gain under IRC 121 it seems it is best that I treat the sale as a sale in rental property, calculating the gain on the sale in a fully taxable transaction and then I can recognize the PAL. Agree?
If I were to exclude capital gains under 121 I end up paying taxes on depreciation recapture when in reality I never benefited from the depreciation in the past because I was subject to the passive losses. Paying capital gains tax on the full gain of the sale and recognizing the PAL seems to be more appropriate.
