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Returning Member
posted Apr 7, 2020 10:44:21 PM

Sale of all shares of MLP's and suspended loss carryovers on Calif Taxes.

On my Federal taxes, the sale of all shares of my MLP PTP's (Publically traded Partnerships) freed up all the suspended loss carryovers and applied those losses against the ordinary income from the sale.

Shouldn't the same suspended losses also be applied on my Calif State taxes?   Especially since Calif is taxing the ordinary gains from the sale.

 

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2 Replies
Expert Alumni
Apr 12, 2020 11:26:14 AM

Yes, if you have suspended losses for California and you have sold all of your shares in the MLPs, any suspended losses for California are deductible.

 

Three criteria must be met before losses are deductible against non-passive income:
 

  • It requires that the taxpayer dispose of an entire interest in a fully taxable transaction to an unrelated party.
  • All gain realized must be recognized.
  • Therefore, in an exchange of the taxpayer's interest, such as a 1031 exchange in which no gain or loss is recognized, suspended passive losses are not deductible.

@rrw2012

Returning Member
Apr 12, 2020 10:17:07 PM

Thanks DianeC958,  for your reply.

I qualify on all three criteria but how do I know whether I have suspended losses for California?  I recieve K-1 s for my federal taxes and they have suspended losses.  Do those apply also to California.? I hope so since Calif is taxing me on ordinary income gains from this PTP.  It seems to me, that if they are counting the gains, they should also allow the losses from that PTP.  What do you think?

 

Thanks again.

rrw2012