PAL to offset capital gain when only 1 of 2 rental properties is sold

[palrental]

I had two rental properties A and B.  Property A was sold and resulted in $50K capital gains after recaptured depreciation and expenses.   I have no other sources of income.

Property A has accumulated Unallowed PAL of $5K and 2021 year loss of $2K.

Property B has accumulated Unallowed PAL of $15K and 2021 year loss of $1K.

The losses from one property has in the past been used to offset the gain of the other.

Long term capital gain up to $40,400 is taxed at 0%.

My questions are:

1.  Can I use the PAL from Property B to offset the capital gains from the sale of Property A?

2.  Do I have to use all the Unallowed PAL and losses to offset the capital gains?  i.e. $50K - $7K(from Property A) - $16K (from Property B) = $27K capital gains.

3.  Can I choose to only use part of the Unallowed PAL from Property B to reduce my capital gains to $40,400?  i.e.  Use all of the Unallowed PAL and losses $7K(from Property A), but only use $1600 and the $1000 loss (from Property B) = $40,400 capital gains.

[Critter-3]

All of the passive losses on property a will be released on the schedule e in the year of sale. This might affect how much of the loss can be taken on property b. The pal is not netted against the capital gain on the schedule d and you have no choice as to how much to use or when to use it, this is set by IRS rules and regulations and the program fills in the correct forms for you.

[palrental]

I understand that all property PAL is released.  Can you clarify if:

1)  PAL from property B can be used to offset property A capital gains?

2)  If answer to 1 is Yes, do I have a choice as to how much I can apply of the property B PAL or must I apply all of it? 

What is the IRS rules and regulations in this regard?  Can you tell me which IRS regulations are applicable here?

[palrental]

Sorry, I meant to say "I understand all Property A PAL is released."

[Critter-3]

1)  PAL from property B can be used to offset property A capital gains?  NO ... passive losses cannot be netted against capital gains no more than you can make apple cider with bananas.

[palrental]

I have 50K of capital gains on line 7 of my 1040-NR, and 22K on line 8 (Other income from Schedule 1 - which comes from line 5 on schedule 1, which comes from Schedule E where all Property A and B accumulated losses are entered), which reduces my net tax to 0.  Is this not offsetting Property A capital gains with PAL from Property B? 

[Anonymous_]

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@palrental wrote:

What is the IRS rules and regulations in this regard?  Can you tell me which IRS regulations are applicable here?

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Section 469 and the regulations promulgated thereunder.