TTax step-by-step it puts my rented room-in-home "C" into Column C in Schedule E, arrives at a loss (after I pro-rated all costs by square foot method, including a share of depreciation on my home) AND THEN TOTALS THAT LOSS WITH GAINS ON RENTAL PROPERTIES in columns A and B AND LOWERS MY OVERALL RENTAL REAL ESTATE INCOME (ie. Passive Income).
Exactly as it should.
my understanding is that renting out a room in your HOME/PRIMARY RESIDENCE is a "special situation" and "IRC section 280A(c)(5) limits deductions to such residential rental income; no deduction for loss is allowed.
Your understanding appears to be wrong. You have no personal use of the percentage being rented out, and it's rented at FMV to a non-related party. So all losses are allowed with the excess loss carried over.
I have been searching for days on TTax forum and the internet (Nolo, etc.),
I personally don't take what websites other than irs.gov say as gospel. I've seen 3rd party sites where one interprets an irs publication one way, and other interprets the IRC the opposite way. Leaves to much room for mistakes. I myself go by the pubs, as I find the IRCs to be extremely wrought with an over abundance of legalese.
Also, Proposed Regulations section 1.280A-3(d)(3)] is just that; a proposal. It's not law until passed by congress. Don't know when that was posted on the website. But I get the impression it's pretty old since it provides publish dates back in the 1980's. Being that it's signed by Jerome Kertz as the Commissioner of Internal Revenue makes me disregard it even more since he was the commissioner from 1977 - 1980. Additionally, he passed away back in 2015.
