Are you required to claim suspended passive losses in year of disposition even if you have no income to offset the loss

[Neiff5]

A partnership we owned an interest in was sold creating a capital gain.  We had enough capital loss carryforward from prior years to absorb the gain. We also had suspended losses from this partnership that were freed up due to the full disposition of the asset that were in excess of our total income for the year. 

Example:

Total active income $100,000

Capital gain  $50,000

Capital loss carryforward ($50,000)

Suspended losses freed up ($150,000)

AGI ($50,000)

Since applying all suspended losses creates a negative AGI, does the full amount have to be applied to this year or can the $50,000 excess be carried forward to offset future passive gains? 

[M-MTax]

1. If the entire gain or loss from the sale of the property is recognized, the current-year loss from the activity (including all suspended losses) can be offset in full against any gain from disposing of the property or combined with the loss from such disposition.

2. If gain remains after item 1, it can be offset against any losses (including suspended losses) from all other passive activities. Any remaining gain is reported in the normal manner. However, any loss remaining is carried forward as a suspended passive loss.

3. If the result of item 1 is a loss, this loss can be offset against any net income or gain from all other passive activities (net of suspended losses carried from earlier years). If any of the loss from the disposed activity remains, it can then be deducted as a nonpassive loss.

Source: https://www.thetaxadviser.com/issues/2008/may/disposingofanactivitytoreleasesuspendedpassivelosses.h...

[Mike9241]

the suspended loss must be taken in the year of disposition. if it creates negative AGI, you probably have an NOL which would carryforward to next year. The issue you have is that Turbotax does not compute NOL so it will not roll to the following year. use form 1045  schedule A or PUB 536 to compute possible NOL

pub 536

https://www.irs.gov/forms-pubs/about-publication-536 

form 1045

https://www.irs.gov/forms-pubs/about-form-1045 

[Neiff5]

Thank you. That makes sense but I didn't realize Turbo Tax wouldn't calculate an NOL carryforward.