No, there is no limitation. The passive loss carryover is the amount that would be considered the business use portion of the loss, if there was any personal use of the vacation rental.
The rental activity should be present in the return, in the year of sale, in order for the loss be populated and reflected accurately on your tax return.
The Schedule E is needed in order to enter the suspended losses, because this is the required location on the return.
You also need to report the sale of your rental property in the Rental Income & Expenses section in order to correctly report the gain or loss due to depreciation.
In the year of sale you must indicate it was rented and at fair rental value. It refers to the time period of the year while it was still owned. This will preserve your suspended losses and allow you to report the sale in the section called Assets/ Depreciation in the Rental section.
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