passive loss carryforward

[Porscot]

I apologize in advance. I have been using turbo tax easily since the early 90s. I have had a very small second apartment in NYC that I had rented from '92 to '13 and correctly filed schedule E every year and in many years there was a mild passive loss carryforward that over time accumulated to $101,000. in'14 I stopped renting the apartment and gradually embarked on a gut renovation that lasted through '16. as I no longer lived in NYC I would use apartment for a week a month when there for business, then COVID and finally decided to sell in '22. Issue is I stopped completing schedule E in '14 and did not check my returns from then till now noting that the 101,000 passive loss carryforward on 8582 stopped being reported starting in '14. (all turbo tax btw)  So, now I am trying to figure out where I report the sale and then how can I report the passive loss carryforward to release. Geez - shame on me for never noticing. Would anyone have advice?

[RobertB4444]

You're going to show the sale of this property in the rental real estate section of the Federal return.  Under Wages and Income scroll down to rental real estate and click start.  You'll enter the address and a couple of details about the apartment and then you'll get a whole list of boxes.  You'll want to tick the box next to "I sold this property in 2022" and "I have passive activity real estate losses carried over from a prior year".  

The system will walk you through everything after that.  You will need information from your 2014 return, since that is the last year that you reported the apartment on your tax return.  You'll need the amount of the passive loss carryforward from that return, but you will also need all of the information about the depreciation that was used up until 2014.  The depreciation deductions that you took for the apartment will change the value that you had and the amount of the sale that is taxable.  But you will also get to take all of those suspended passive losses that you have been carrying with you.  As long as you can access that 2014 return it should be pretty easy.

@Porscot 

[Porscot]

got it - thank you so much.

i had to recreate some schedules in turbo tax, but I did not get any challenges and it seems to flow. I was so concerned by the gap in the data being reported in 8582. Fortunately i had the old returns to capture the data and gradually worked through the sale and then created a new Schedule 3 noting total disposition and inputting the PALs. 

Guess i am surprised why Turbo did not force me to reallocate the property to personal on my '14 return as i just chose to ignore it.

Much appreciated

[Carl]

@RobertB4444 , @Porscot clearly states, " I stopped completing schedule E in '14".  So reporting the sale in the SCH E section is incorrect.

You'll report the sale in the "Sale of Business Property" section. From your 2014 tax return you'll need the 4562 and the 8582, so you can report the depreciation recapture and the PAL carry over losses.

[AmeliesUncle]

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@Porscot wrote:

got it - thank you so much.

i had to recreate some schedules in turbo tax, but I did not get any challenges and it seems to flow. I was so concerned by the gap in the data being reported in 8582. Fortunately i had the old returns to capture the data and gradually worked through the sale and then created a new Schedule 3 noting total disposition and inputting the PALs. 

Guess i am surprised why Turbo did not force me to reallocate the property to personal on my '14 return as i just chose to ignore it.

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Yeah, TurboTax is severely negligent in not file Form 8582 after you no longer have a rental property.   I suspect that many TurboTax users are cheated out of legitmate deductions because of that error.