@DianeW777 @AmeliesUncle I found this IRS Memo. Based on this it is my understanding that I can recognize the PAL in the year of sale. I do have other income for 2020 and Turbo Tax seems to be working properly by allowing the loss I entered in the Schedule E passive loss carry over section, indicated I did not materially participate and that the property was sold, and it has labeled the loss NPA (non passive activity). Also, the sale was to an unrelated party. If either of you have additional information please let me know. I really appreciated all the assistance.
https://www.irs.gov/pub/irs-wd/[social security number removed].pdf
In the CONCLUSION section: Gain excluded from gross income under § 121 of the Code is not an item of passive activity gross income for purposes of § 469. Therefore, the excluded gain does not offset suspended passive activity losses. To the extent that the losses from the rental activity, including the suspended passive activity losses, exceed any net income or gain for the taxable year of the disposition from all other passive activities, the losses will be treated as not from a passive activity.
In the ANALYSIS section: a sale of a principal residence is a transfer of property for money consideration and, as such, gain realized on the sale is recognized in the year of the sale. Section 121 is simply an exclusion provision for gain that is realized and recognized in the year of sale. In these facts, because $100,000 of gain realized is recognized upon the sale of Individual A’s entire interest in a passive activity to an unrelated party, § 469(g)(1)(A) applies. Therefore, to the extent that that the suspended passive activity losses exceed any net income or gain for the taxable year of the disposition from all other passive activities, the $30,000 losses will be treated as not from a passive activity under § 469(g)(1)(A).
