Removing disposed rental property also removes carry over loss for this year, how do i carry over loss?

[nate_cc]

I sold the rental property last year(2018) and have a carry over loss on 8582.  TT appears to calculate everything correctly until I remove the rental from TT.  Then the loss is removed as well.  Is it ok, to keep the rental property and schedule E intact for this year, so the carry over is calculated correctly, then remove it next year?  I have entered 0 for all rental values and days it was rented.  Otherwise how do I put the carryover loss into TT?

[Rick19744]

If you had a complete disposition in 2018, which your facts indicate that you did, then you should not have any carryover into 2019.

All of this should have been addressed on your 2018 tax return.

[nate_cc]

That is correct that it was a complete disposition, but I have Schedule E suspended loss for carryover to 2019 in a smart worksheet.  I was under the impression, that I could continue to carry this over?

[AmeliesUncle · Accepted solution]

The loss should be fully allowed in 2018  (assuming it was sold in a "fully taxable transaction").  If the full amount of the carryover loss was not taken in 2018, then you probably answered something wrong (you need to say the rental property was sold in the introductory part of the rental section).  The fact that the rental carried over also supports that fact that you did not say you sold the property.  You will need to amend 2018 to correct that.

[nate_cc]

I went back to check 2018, you are correct, it was not marked as sold, but form 4797 was filed and shows the property as sold.  As soon as I checked sold in 2018 TT, the refund reflected an increase that seems inline with the loss. 

So the correct action is to amend the 2018 return?  And then the rental should be removed from the 2019 return?

[AmeliesUncle]

Yes, amend 2018 and yes, remove it from 2019.

For 2018, you went into the "asset" and said it was sold (which is why the sale appears on Form 4797).  But it is first section (the introductory part of the rental section) that when you indicate the entire rental was sold, that is what triggers the release of the passive loss carryover.

[Carl]

Use this guidance when amending the 2018 tax return.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.