CAPITAL LOSS CARRY FORWARD ON RENTAL PROPERTY

[Qtax09]

I have a capital loss on the sale of rental property a few years ago.  Now I am selling another rental property for a capital gain.  Can I deduct the entire capital loss carry forward against the gain?

[tagteam · Accepted solution]

How did you report and record the loss on the sale a few years ago?

Net losses on the sales of rental real estate are typically treated as ordinary losses (not capital losses) and could be used to offset all other types of income in the year of the sale (and potentially create an NOL).

[Qtax09]

I inherited a rental property for a value of $750K. I sold it years later for $350.

so that is a capital loss right?  I have been deducting $3000 a year.

[tagteam]

Understood, but did you use it for rental purposes after you inherited it?

[tagteam]

I should add that if you've been using it for "years" as a rental, then you should have been taking depreciation deductions each and every tax year. Those deductions would lower your basis for tax purposes.

[Qtax09]

yes and Turbo tax was deducting for me

[tagteam]

If you started with a basis of $750,000, then what was your adjusted basis when you sold the property?

[Mike9241]

I inherited a rental property for a value of $750K. I sold it years later for $350.

so that is a capital loss right?  I have been deducting $3000 a year.

was it rental property when you inherited it and during the period of ownership? if so, then you should have been taking depreciation on the portion of the Fair Market Value allocated to the house for the period it was rental. If it was a rental when you sold it the loss would have been ordinary not capital and the full loss would have been deductible in the year of sale.

only if it wasn't rental property or other business property when you sold it would the loss be capital but your basis for the capital loss must be reduced by the depreciation you should have taken.   

seek professional help