The recognized capital gain didn't offset the unallowed rental loss, Why?

[ramonzzf]

Here is my situation: first, after I entered all the rental income, expenses, and depreciations, I calculated a rental loss. Part of the loss is unallowed and I saw in the form 8582 that it will be carried over to next year. On the other hand, I exchanged one of my properties and recognized part of the realized capital gains. Because the recognized gains will be taxed this year, I believe the recognized gains should be used to offset the rental loss so that no unallwed rental be carried over to next year. However, I didn't see that this shows in my Turbotax form 8582 and schedule E. Is there anything I did wrong possibly or I missed anything?

Thanks in advance

[Mike9241]

the full passive loss is not realized because the transaction was not fully taxable.

look at form 8582 - how much passive loss was allowed - how much gain was taxed.

[ThomasM125]

Your rental loss is a passive loss and as such is not normally allowable against capital gains but you are allowed to do this in the year you sell the property.  As @Mike9241 said, the gain might not have been sufficient to absorb all of the losses. You should see the capital gain included on line 1(a) of form 8582 and the losses on line 1(b) and 1(c).

@ramonzzf 

[Edited 3/14/22 at 12:45 PM EST]

[ramonzzf]

@ThomasM125 , Yes, that's the problem: my recognized gains did not appear in column 1a.

I sold the old property in 2021. In the same year, part of proceeds was exchanged to a replacement property and because it was a partial exchange, we recognized part of the realized gains. The recognized gain amount is bigger than the loss amount. So according to what you said (the property was sold in 2021 and the recognized gain > loss), the recognized gain should have appeared in 1a of 8582.

What could I do to make the recognized gain appear in 1a of 8582? did I missed anything?

[ThomasM125]

Can you clarify that the gain on sale/exchange of the rental property appears on form 4794, in part 1? If so, it should transfer to form 8582 line 1(a).

[ramonzzf]

@ThomasM125 yes, the recognized gain appears in part 1 on form 4797 (I guess 4794 is a typo as there is no form 4794), but it did not appear on line 1a of form 8582

[RobertB4444 · Accepted solution]

There are several reasons why that gain could be not appearing on form 8582 - most of which are there on form 4797.  Is the gain showing up anywhere else in the return?  Has it been classified correctly?

You are probably better off having someone walk through the return with you to look at your entries so I recommend getting live expert help.

Here is a link to finding a TurboTax expert.

However, that requires upgrading your product which may be an expense you don't want.  In that case you can call an expert and ask questions over the phone.

Here is a link to the TurboTax Phone Number.