Passive loss

[Rich Heimann]

I invested in an LLC in 2019.  Later in 2019 I gifted the entire investment to my son.  The schedule K-1 shows negative business income and shows my Capital account reduced to 0.  My research says that passive losses can only be offset by passive gains this year,carried forward to next your or by disposition of the investment.  TurboTax is not allowing this loss to reduce my income.  I said no to the material participation. Is Turbotax missing something, or am I?

[tagteam · Accepted solution]

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@Rich Heimann wrote:

Is Turbotax missing something, or am I?

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Suspended passive losses are not released until the interest in the passive activity is transferred in a fully taxable transaction to an unrelated third party.

[Rich Heimann]

So what happens when the interest is gifted.  Why doesn't turbo tax have a query about gifting.  I know longer have the shares so How could the loss be suspended?