We are California residents and have 3 condos in Hawaii one of which we sold in 2019.
We have a capital loss carryover amount as well as passive loss carryover amounts for each of the condos. For the CA return, the gain on the sale reduced our capital loss carryover amount, which we understand. In addition, it also removed large amounts of passive losses from the other two condos and created a negative gross income which we didn't need. So all our losses evaporated.
Is there something that should be done to preserve the passive loss amounts for the 2 condos?
It is difficult to analyze some situations in a forum such as this. Having said that, I will provide some general guidance but recommend that you consult with a tax professional who can see the actual return and if everything is flowing correctly.
Since this appears to be generating a large gain, it would be wise to have a tax professional walk thru this with you one on one so as to allow you to file an accurate tax return.
I agree sitting down with a local tax professional is the right thing to do if you don't understand what's happening yourself.
Also the passive losses that are quote evaporating are truly not evaporating. Review the return again and notice that the passive losses were released and it produced an nol which now will carry forward... So it is not lost it's simply converted.
It sounds correct and there is nothing you can do now to change it.
That is why you should consult a tax professional BEFORE making large financial transactions such as selling a rental property. They could have told you what would happen and possibly make suggestions for what to do.