Allocation of rental income and losses in a non-resident state when lits passive oss carryover offsets the income from different state

[nirbhee]

I have rental properties across state with income and losses, and some of them with paasive loss carryovers from previous years.

I understand in federal rental income, losses for any properties can offset other rental gains but nonresident states only use rental losses for properties in the nonresident state to offset rental gains in their state.    

But what about the passive carryover losses from one state used to offset different state's income? How do I calculate loss for a state when its deductible loss carryover offsets another state's income.

Should it be added as is ??

For example, considering two prpoperties in State A ,and one property in State B :

Both states are files as non-resident. 

	state A property1	state A property2	state B property1
Rents minus expenses (line 21 from SchdE)	1000	6000	10000
Deductibe real estate loss (line 22 from SchdE)	-12000	-6000	0

Fedral rental income would look like :

Income (line 24)	17000
Losses (line 25)	-18000
Total income or Loss (line 26)	-1000

But for State A is the caluclation below correct ???

Income (line 24)	7000
Losses (line 25)	-18000 ???
Total income or Loss (line 26)	-11000 ???

Thanks for your help!

[MaryK4]

Each state has its own rules on the application.  Can you clarify the state?  

[nirbhee]

Property1 in the example above is in north Carolina, property 2 is in west virgina.

Thanks!

[MaryK4]

If you look at the screen shots (below) both West Virginia and North Carolina look at the total federal amount then the state amount.  Because you can identify which loss apply to the specific property, you would want to net them individually.  Like I said this is state specific but this is the method used mist often, but there are state that allow the loss pro rata.  @nirbhee 

[nirbhee]

Does "net them individually" align with the numbers I had in the example in my question? Sorry I don't know what pro-rata would mean.

Thanks!

[DianeW777]

Yes, your state A information would be correct in your example.  You would report the net rental income on the state return where the property is situated, for each property in the state or overall net income for both properties in one state depending on the state questions.

Pro rata: It is used to describe a proportionate allocation. It essentially translates to "in proportion," which means a process where whatever is being allocated will be distributed in equal portions.

• This would be used if you moved from one state to another and needed to calculate the amount that should be included in your part year resident state.  All of the income is required to be reported on the state return where the property is physically situated.

@nirbhee 

[plawlor78]

@MaryK4 I have a similar question. I am a California resident, but have K-1s from properties in Oregon, Montana, and Missouri. How does it work in these states?

And how do we keep track of passive losses from previous years for non-resident states?

Also, should I be messing with the "Passive Activity Loss Summary" at all?

[MarilynG1]

There's a screen in each state interview where you can adjust your K-1 income (or loss) belonging to that state from the amount carried over from your federal return.

You need to keep a spreadsheet of your gains/losses reported in each state each year for your records.

@plawlor78 

[plawlor78]

Thanks @MarilynG1 

Let's take Oregon as an example. Can you show which screen you are referring to?

Also, do states have no equivalent to the federal form 8582? It seems odd that nothing is tracking suspended losses?

[AmyC]

You are tracking them. Each state has different rules for carryover. OR allows you to carryover the same as the federal but based on the state income and loss. See OAR 150-314-0110 – Allocation of Oregon Modifications which states:

Example: John is a nonresident of Oregon and has rental property in both Oregon and California. His loss from all rentals is $50,000 and from his Oregon rental $10,000. Federal law allows a deduction of up to $25,000 for rentals. John would show $25,000 loss in the federal column of Form 40N and $10,000 loss in the Oregon column of Form 40N. John claims the $10,000 loss for Oregon because the loss for a nonresident from Oregon sources is treated in the same manner as a passive loss for a full-year resident. 

In the case of a nonresident, losses resulting from passive activities derived from or connected with sources outside Oregon are not deductible for Oregon purposes, regardless of a later change in the taxpayer’s residency.

@plawlor78 

[plawlor78]

Thanks @AmyC  for the example. Let's say that I had a loss for Oregon from last year that I wanted to carryforward to this year. Where do I enter the carryforward loss from last year into TurboTax for Oregon during the TurboTax interview (or into a form)? 

[plawlor78]

@AmyC , following up. When you say that you are tracking it, what do you mean? How are my total carryforward losses from previous years showing up in my Oregon return for this year? Where do I enter it?

When I only have passive activity losses, all my losses are suspended and carried over on my federal return worksheet. Where do I see that on the Oregon state return?