Capital Gain & Form-8582

[ashburnconsulting]

Hello,

Over the years (including current year) I have reported losses on form-8582, stemming from multiple K1s. In the current year, I have a capital gain by selling my interest in one of the K1 (and this K1 has never incurred any loss).

Can I utilize the losses on form-8582 (which originated from other K1s) to offset this capital gain?

Thanks.

[MinhT1]

No, suspended passive losses reported on form 8582 cannot be used to offset capital gains. They can only be used to offset passive gains.

[ashburnconsulting]

The losses were accumulated from a "Passive Activity", and this gain is also from the same "Passive Activity", hence we can call it Passive gains.

In that case, what would the answer to my below question would be?

Over the years (including current year) I have reported losses on form-8582, stemming from multiple K1s. In the current year, I have a gain by selling my interest in one of the K1 (and this K1 has never incurred any loss).

Can I utilize the losses on form-8582 (which originated from other K1s) to offset this gain?

Thanks

[Anonymous]

According to the Internal Revenue Service, capital gains are not considered passive income.

Capital Gains Defined
The Internal Revenue Service strictly defines passive income to include only a few revenue streams, and the election to treat capital gains as passive income does not exist. A capital gain is an increase in value of a capital asset, such as an investment property or stocks, that makes them worth more than they were when you purchased them.

However, until the capital asset is sold, you will realize no gains. Capital gains can be short-term – held for a year or less – or long-term assets held for more than a year. When a capital asset is sold, then the proceeds from the sale are taxable. But, just how much you're taxed depends on several factors, including whether or not it was held as a long or short-term asset.

if you decide to report it as passive capital gain, you should include a disclosure in your return that you have treated the gain from the disposition of partnership X as a passive capital gain resulting in the allowance of passive losses from other partnerships.  Or something to this effect.  making a disclosure might save you fraud penalties.   

[ashburnconsulting]

1. It is a long-term gain (I have had a interest in K1 over 24 months)

2. My question:

Over the years (including current year) I have reported losses on form-8582, stemming from multiple K1s. In the current year, I have a gain by selling my interest in one of the K1 (and this K1 has never incurred any loss).

Can I utilize the losses on form-8582 (which originated from other K1s) to offset this gain?

Thanks.