It can be confusing so I will try to break it down in an easier explanation. When a rental property is sold or disposed of, then the full unallowed losses are captured and incorporated into the tax return that year. You no longer have a passive loss carryforward after 2019.
What did occur in 2019, because your passive losses were fully included, your overall income resulted in a net operating loss (NOL). This is separate and distinct from the prior year passive losses. 2019 is an NOL year.
What is an NOL?
If your deductions for the year are more than your income for the year, you may have a net operating loss (NOL). An NOL year is the year in which an NOL occurs. You can use an NOL by deducting it from your income in another year or years.
If you filed your return with TurboTax in 2019, then you should have a NOL carryover worksheet as indicated. If you do not have that or cannot locate it, then you must complete the worksheet manually. You can find the worksheet in IRS Publication 536-2019.
Your math is understood but does not actually calculate the allowed NOL carryforward for 2020. It must come from the worksheet so I have included the 2019 publication so that, if needed, you have the correct NOL carryforward worksheet for 2020.
If you would like more assistance with your return you can check out TurboTax Live to see if that's something you might be interested in.
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