Passive Activity Loss carryover

[M-MTax]

You can combine the properties into one OR continue depreciating the relinquished property and the replacement property also. You probably kept two schedules and so have two carryovers.

[mw29]

@M-MTax - How can I combine them into one automatically? I mean I can punch in the total number in the screen after "Do any of these apply..." as others have mentioned above, but I would think TT must be smarter than this and it should know that I did 1031 in last year's return?

Right now basically I have 2 properties in Sch. E in 2 separate column, but the older/relinquished property has $0 income, etc. so it's pretty much a blank column. And I also have 2 rows in 8582 PAL limitation worksheets where the old/relinquished property is listed as carrying that $10k amount.

Is there a benefit in keeping them separate?

Thanks in advance!

[M-MTax]

@mw29 The only benefit would be if there was an election to treat the properties separate for the purposes of depreciation. Otherwise, it makes no difference that there are two 8582 worksheets......your suspended PALs will be released when you eventually sell the property in a taxable transaction.

[mw29]

Hmm.. OK. I think we are talking about different things now? Is suspended PALs basically the PAL carried over from the old/relinquished property to the new one?  The word "suspended" is always confusing to me because the losses were not actually suspended right? It actually goes into the new property and continues to be treated as PAL?
 
There's actually only 1 8582 worksheet, but there were 2 lines last year. I want to eliminate this and make them a single line. Same thing with Sch. E. I want to eliminate the blank column (the relinquished property).

The PAL carryover practically now *should* belong to the new property we acquired in that 1031 exchange because that's the whole idea of the exchange, right, ie. the gain and loss are carried from old to new property.

[M-MTax]

Yes the PAL goes into the new property but is suspended until you have passive income for which the PAL can be used to offset.

You can combine lines except for the depreciation of the relinquished property and replacement property unless you rolled that into one asset.....the replacement property.

[blackjack1627]

How would I enter passive losses on a rental property from years prior to 2019?  I've had this property since 2002 but have not used Turbo Tax continuously through the years.  Can I go through my previous tax returns, gather previous passive losses and report it against my 2020 sale?

[m25]

@mw29 - Thank you SO MUCH for posing this question last year.  I am in exactly the same situation a year behind you.  I did a 1031 exchange in 2020; now for 2021, I had no income for the original (exchanged) property), but I have carryover loss from that exchanged property that has not yet been fully applied to gains.  What did you end up doing?  I am seeing the same thing on Schedule E that you described: the column for the original (exchanged) property is blank except for line 22 which is reporting a carryover loss (no income and no expenses in the column).  Did you (a) leave Schedule E "as is" reporting an essentially blank column for the exchanged property except for the carryover loss, or (b) did you eliminate the column for the exchanged property and manually input a new carryover loss amount into the replacement property that is increased by the amount of remaining carryover loss from the exchanged property?  Many thanks! 

[mw29]

@m25   It's been a while and I don't have TT in front of me now, but IIRC I ended up with b) eliminate the column for the old (exchanged) property and manually (YES!) added the loss to the new (replacement) property.

Actually you got me really curious and I checked, and yup that's what I did. 
IRS hasn't called or mailed me (except for the fake IRS with foreign accent leaving me vmail lol), so I guess I am OK...

[m25]

@mw29 Thank you for the reply!  I followed your lead and checked the forms before filing - all looks good! Intuitively, it makes sense to eliminate the exchanged property and add the passive loss to the replacement property, but it was comforting to have the additional support any time I start making manual changes.  Thanks again!

I also found this thread which recommends the same action: 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/last-year-i-did-a-1031-exchange-...

[KH-TX]

I have passive loss carryover for rental property. I see the TT page showing the loss in 2018, but realize was not applied in 2019 or 2020. I have checked the box "I have passive activity real estate losses..." Now looking at sched E for 2021; isn't showing up there again.

[GeorgeM777]

Check Form 8582, line 1c.  Prior year's un-allowed losses are entered on line 1c. 

@KH-TX

[castillonorlando]

Some one stolen my old phone trying to steal my income tax

[Critter-3]

I assume you got a new phone but with the same number  or  got a new number and shut off the old one.

Log into your TT account and change the password to block access ...  also make sure the phone number and email are up to date as well.  Turn on the 2 step verification as well.

To update your TurboTax account, see this TurboTax support FAQ - https://ttlc.intuit.com/questions/1900724-how-do-i-update-my-turbotax-account-information

[Lily Yu]

In 2021 we had a couple1031 and exchanged a few properties ("relinquished") in 2021. The 1031 events were reported in 2021 tax return.

Working on 2022 tax return, I see all the relinquished properties exchanged out in 2021 are listed in Turbo Tax and they have passive activity losses (the check box "I have passive activity real estate losses carried over from a prior year" is checked).

Please help me understand a couple questions regarding the passive activity losses on these "exchanged/sold" properties:

• As they have passive activity losses (and deferred gain from last year's 1031) even though we physically no longer own them, would it mean we need to include these properties in 2022 and future years' tax returns? 
• If so do I need to do anything about these properties in TurboTax for 2022 and in the future?  My apologies for a naive question, is there any way we can "transfer" the PAL amount to the Replacement properties involved in the same 1031 event?

Thanks,

Lily

[Lily Yu]

Hi Carl,

Thank you for your explanation regarding PAL on a rental property: 

"Basically, all of your carry over losses are "released" in the tax year you sell the rental property.

First, losses are deducted from any gain realized on the sale.

Next, if the losses get your taxable gain on the sale to $0 and there's a loss amount left over, the remaining amount is deducted from other ordinary income in the same tax year of the sale.

Then if that gets your taxable ordinary other income to zero and there's still some loss left over, it gets carried forward to the next tax year."  All this makes perfect sense to me. 

Some website states "the owner could 1031 exchange the property to defer the gain and continue to carryforward the PALs until they can be used."  This statement seem logical to me but I don't quite understand if this will be done by Turbo Tax or what's the technic details to "carryforward the PALs until they can be used.   Do we need to include the exchanged out property in all subsequent tax returns until the PALS are used.

Thanks,

Lily