Releasing Loss Carryforwards after a sale in a rental property LLC.

[martin3]

I receive a K-1 from our 3 member LLC (taxed as partnership) that only owned one property. We sold it in 2025 after running losses that have been carried forward over several years. The 2025 K-1 has 9.a. Net Long Term Capital Gain to reflect the sale, but I don't see how I'm supposed to trigger the online program to release the loss carryforwards that turbotax has been accumulating. I recall hearing that checking the box "I disposed of my interest this year" would cause that to happen. But I haven't disposed of the interest. We still have the LLC and will reinvest the cash eventually. Am I correct that we can release the carryforwards? How do I do it?

Thanks!

[PatriciaV · Accepted solution]

If the partnership is ongoing, the operating losses carry forward until the partnership has operating income to offset the losses. 

For a partner/member, if you have capital losses from the partnership K-1 on your return, you can offset those with capital gains from any source. If you have no capital gains this year, the losses are carried forward until you can offset the losses with capital gains. 

TurboTax will handle this for you if it's entered correctly. On a Form 1040 return, Schedule D Part II shows the calculation of long-term capital losses. The summary of what will be applied to your current income is in Part III.

Capital Loss Carryover Worksheet (not an IRS form) shows how the Capital Loss Carryover was used this year.

Capital Loss Carryforward Worksheet (not an IRS form) Line 13 shows the actual capital loss carried forward to next year.