Passive/Suspended loss

[morrillpj]

Hi,

I sold a rental property last year with a passive suspended loss.  The loss exceeded my income and TT used it in full as a deduction when I indicated the property was sold.  Since the loss exceeded my income, can the remainder of the "unclaimed loss" be carried forward to this tax year?  In TT I do not see that happening and not sure if it is allowed.

Thank you in advance!

[KrisD15]

To clarify, I assume the suspended loss was applied to the sale. 

Assuming you had Depreciation Recapture and more than likely Capital Gain. 

If the sale was in 2022, yes apply the loss. 

Go to the Rental Properties and Royalties section 

Continue and select Edit for the property

Select Property Profile

Continue to the "Do Any of These Situations Apply to This Property?" screen

You should have marked "Sold"

Also select "I have passive activity real estate loss" on that same screen

[Carl]

@morrillpj All suspended losses are released in the tax year of the sale. However, if those suspended losses get your total taxable income to $0 and you still have more of those released losses to deduct, then if you do as  @KrisD15 has said, the program "should" carry over any unused losses to 2023. You'll be able to deduct a maximum of $3000 a year until all used up. The carry over "should" be on the 8582 in your 2022 tax return.

[Anonymous_]

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@morrillpj wrote:

Since the loss exceeded my income, can the remainder of the "unclaimed loss" be carried forward to this tax year? 

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You may have a net operating loss (NOL), which can happen when suspended passive losses are released upon the sale of rental real estate.

Refer to the IRS publication at the link below to calculate an NOL.

https://www.irs.gov/publications/p536#en_US_2022_publink1000177318

[Mike9241]

if there was a loss on the sale of the property, that would flow to form 4797 part 1

if 9b of form 4797 is a loss that flows to line 11 of the form then if line18b of the form is a loss it flows to schedule 1 line 4 any suspended passive losses don't flow to form 8582 because of the disposal.  so if you have negative adjusted gross income after adding back any capital loss on line 7 of the 1040 you have a net operating loss. use form 1045 schedule A to determine the amount.

you can only carry forward an NOL that arose in 2021 or 2022. i don't think Turbotax calculates this so be forewarned in doing 2023

[Anonymous_]

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@Mike9241 wrote:

i don't think Turbotax calculates this so be forewarned in doing 2023

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Correct. TurboTax does not calculate an NOL nor does it carry one forward; users need to enter an NOL carryforward manually.

[morrillpj]

Thanks to all on this thread.  In reading the publication from the thread it states:

"If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the “Other income” line of Schedule 1 (Form 1040) or Form 1040-NR (line 8 for 2022). Estates and trusts, include an NOL deduction on Form 1041, line 15b, for 2022.

You must attach a statement that shows all the important facts about the NOL. Your statement should include a computation showing how you figured the NOL deduction. If you deduct more than one NOL in the same year, your statement must cover each of them."

I can enter the NOL carry over on Schedule 1 however form 1041 does not appear to be in the TT library of forms showing the computation.  Can I not use TT to file this year because of this condition?

Thank you again!

[Anonymous_]

You can use Form 1045 to determine the amount of the NOL and carryover but TurboTax does not support Form 1045.