It hasn't taken the passive activity losses into account (or do I think so?).
This may happen if you have multiple assets and did/didn't do any one of several things.
- In the Property Profile section (2 screens in I think) if you do not select the option for "I sold this property", then your PAL carry overs will not be released. So make sure you select that option.
- If you sold the property at a gain, then you must show a gain on all assets, even if that gain is $1 on some assets, and $100,000 on other assets. A gain is a gain either way.
- Ditto the opposite of above if you sold at a loss.
- TurboTax folks keep saying you can enter your total sales information on just the property entry, and a sale price of all remaining assets as $0. That's just flat out wrong. When you do that, the depreciation on those assets you entered $0 for is not recaptured. Instead, it's included in the capital gain and you are taxed on it at the higher capital gains tax rate, instead of the lower "ordinary income" tax rate. Don't know it for a fact, but this "may" contribute to losses not being used, even though they are released. Remember, once losses get your taxable income to zero, that's it. Any remaining losses just get carried over to the next year and you may be limited to a $3000 loss allowance each year after, until those losses are used up.
