sold rental property and report suspend passive loss

[nangua825]

sold my rental property last year and reported as sale of business. i had little gain from the sale but over the years i have unallowed passive activity loss reported on 8582. when i reported those unallowed loss under 'Nonrecaptured Section 1231 loss', my refund reduced somhow, shoudn't it go up?  I read more on 4797 instruction, seems like that section is used to report 'section 1231 losses deducted during the 5 preceding tax years', then where do i report my suspended PALs? 

[ColeenD3]

I'm assuming you mean that you recorded the sale under Sales of Business Property rather than in the Rental section. You will have to adjust the basis by hand by the amount of your 8582 losses. Keep your Form 8582 with your printed return.

@nangua825

[nangua825]

thanks for the quick response, yes i reported as  Sales of Business Property, can you tell me which IRS Pub has the info you were talking about? adding suspended PALs into cost basis, i'm reading Pub 544, 551, 4797 and cannot find anything about it.

[ColeenD3]

Unfortunately, you have to act within the confines of the program. If you had had rental income in 2019, you would have been able to enter the sale there and the passive losses would have been incorporated. They have to be taken into account and you can't adjust the sales price. This is why I am strongly suggesting that you keep the Form 8582 very safe.

From Form 8582 instructions.

Form 4797

If you sold assets from a passive activity or you sold an interest in your passive activity, all gains from the activity must be entered on the appropriate line of Form 4797.

@nangua825

[Anonymous]

on the rental income worksheet there is a carryover secyion.  make sure the the carryover form 2018 as a negative number is there 9passive line)

you'll also need to go down to the passive lmits section and breakdown the amount you listed above betwwen 2018 and before 2018.

QBI info may also need to be entered. 

[ColeenD3]

I did a little research and came up with another solution that will work better for you.

You need to have a Schedule E in order to use the suspended losses, because they were listed in that section.

You also need to report the sale of your rental property in the Rental Income & Expenses section in order to correctly report the gain or loss due to depreciation. 

The way to get around this is to say that the property was rented at least one day, but don't report any rental income. This will preserve your suspended losses and allow you to report the sale in the section called Assets/ Depreciation in the Rental section. 

[nangua825]

i bought the condo in April 2007 and lived there until Oct 2010, converted it to rental after that. my tenants moved out in Sept 2018, i put the rental for sale after that and it's sold in June 2019. 

Some posts i read here said the time the rental was vacant cannot counted as rental but personal use. so I listed the sale as Sale of business, and split and cost and price between business use and personal use, only problem with that is i cannot report suspended PALs  for rental. 

So now you say the better way is to still report it as rental just don't report any income, can i report the mortgage interest and real estate tax I paid in 2019 there?  because I still have a 1098 form in 2019 for that property.