topic Prior Year Unallowed Losses from Former Passive Activities in Business & farm

Prior Year Unallowed Losses from Former Passive Activities

JanetLM — Thu, 02 Apr 2020 22:34:09 GMT

We converted a rental property to our residence in 2018. In 2019, TurboTax removed the property from our return since we did not try to rent it out at all during 2019. We had significant prior year unallowed losses as of 12/31/18 but these no longer appear in our 2019 return. However, we have other passive income in 2019 and will have in future years. How can we offset this current and future passive income with prior year unallowed losses from former passive activities since these losses no longer appear in Turbotax? It doesn't make sense to me that the 12/31/18 prior year unallowed losses are no longer tracked in TurboTax just because we no longer rent the property. What am I missing?

Re: Prior Year Unallowed Losses from Former Passive Activities

JamesG1 — Thu, 02 Apr 2020 23:15:52 GMT

I suspect that you will first have to add back the residential rental activity and residential rental asset under Rental properties and Royalties.

After the asset is recreated, click Edit to the right of the asset at the screen Rental and Royalty Summary.
Click Update under Property profile and Continue through several screens.
At the screen Do any of these situations apply to this property, scroll down to Carryovers and click on I have passive activity real estate losses carried over from a prior year.
At the next screen, the losses are entered as negative numbers.

Re: Prior Year Unallowed Losses from Former Passive Activities

JanetLM — Thu, 02 Apr 2020 23:26:38 GMT

I did exactly as you suggested but when I get to the box where I indicate that the property wasn't rented at all in 2019, Turbotax deletes the property as a rental and removes everything associated with it, including the prior year unallowed losses which I had input. Any other thoughts? Thanks.

Re: Prior Year Unallowed Losses from Former Passive Activities

Critter — Fri, 03 Apr 2020 00:43:48 GMT

OK ... YOU have to save a copy of the 2018 return with the worksheets and KEEP the 8582 info with your home docs to use when you sell the home ... the program will NOT keep this info from year to year automatically since it is not part of the tax return any longer.

Re: Prior Year Unallowed Losses from Former Passive Activities

JanetLM — Fri, 03 Apr 2020 01:05:00 GMT

Thanks for your reply. So what this means is if we have any future passive income from other activity (which we will), we can't use the unallowed passive losses from the rental of our home to offset that income. Is that correct? This also means that we can't claim the unallowed passive losses until we sell the home. Is this correct?

Re: Prior Year Unallowed Losses from Former Passive Activities

AmyC — Mon, 06 Apr 2020 20:47:34 GMT

Keep your 2018 to use those passive losses against future passive income. For more information, see IRS Topic No. 425 Passive Activities – Losses and Credits ...

You can claim passive loss against passive income.

Re: Prior Year Unallowed Losses from Former Passive Activities

kandake — Thu, 02 Jul 2020 03:05:37 GMT

Very helpful! best answer!

Kandake