@klkaylor wrote:The bottom line is that while I think the program did the correct thing in using all forms of "losses" to bring the taxable capital gain from the house sale to zero, although I have some issues with the methodology. I think it fails terribly in the fact that it uses the residual of all forms of losses from "zeroing out" the house sale to be used agains "earned income", to bring my total tax to zero for the year.
I have dealt with these issues for over 30 years using Macntax/Turbo tax without a single audit. Unless someone can quote the IRS rule allowing for passive losses to offset earned income (understanding the 25K offset for MAGI under 150K) and/or capital losses to offset more than 3K of earned income, then this program has an error. I would not file this return as produced due to this error.
Where is your citation from the IRS about why you think it is incorrect?
As I stated above, Passive Losses are allowed to the extent there is Passive Income. No, it does not need to directly offset that Passive Income (capital gains) - the Passive Losses don't lose their 'character' of being 'ordinary' (rather than 'capital').
