Sale of rental property and California suspended passive activity losses

[khopton]

I live in California and sold a property with suspended passive activity losses. I have to figure the difference between the California PAL allowed and the one from 8582. I also have to do that again with AMT rules. All the instructions seem to say I have to figure the California PAL but they don't seem to say what different rules apply so that I can adjust the amount for California.

This sale took place after a conversion so there is no current year rents or revenue. All of Schedule E is just the suspended prior year losses.

FTB 3801, mostly down column (e), is the part that I am expected to calculate but for which I have no formula.

For CA AMT version of the PAL, I am supposed to do FTB 3801 again but apply the CA AMT rules. Again, I cannot find CA AMT rules as they apply to rental PALS deductible upon sale.

Most of what I have found is for current year losses and offsetting income but that does not apply here.

TurboTax is not giving me anything. It adjusts the entire PAL away to nothing, perhaps because it cannot see all the history of deductions that created the losses over the past 25 years. I would prefer to know what the formula is, rather than how to coerce TurboTax to keep trying. Thanks.

[tagteam]

You might want to try contacting Support or a local tax professional.

How do I contact TurboTax? (intuit.com)

[emina]

Hello and thanks for joining us today!

When you say: "This sale took place after a conversion" do you mean the rental was converted into a personal residence? 

If so, in the year that the property was converted, you would need to file the Form 4797, Disposition of Business Property, which includes the conversion to personal use.  This closes out the Schedule E for reporting.  When you sell the property, you will have to account for the depreciation to determine the gain or loss (essentially it is suspended).  

When it comes to CA PAL limitations, here is the link with the instructions for the 3801 form: https://www.ftb.ca.gov/forms/2021/2021-3801-instructions.html#General-Instructions

However, this does sound like a complex issue, and we are not able to provide formulas/calculations over this forum. Please do feel free to contact us if you need further assistance, so that one of our experts can look into this.

[khopton]

Re: emina  "do you mean the rental was converted into a personal residence?"

Yes, the rental was converted to a primary residence. A great deal of discussion took place here and elsewhere resulting in the general consensus that because the entire property was used for rental until such time as the entire property was used for primary residence, and because the property was sold as a residence (albeit one with a history of depreciation) then Form 8949 should be filed rather than Form 4797.

That is what I have been doing.

The Instructions for Form 3801 are not helping me but thanks for linking them, nevertheless. Thise real just say "figure out all the differences, do all the calculations and then put the completed answer in Column (e)." Ugh.

I may be calling  🙂   

Thanks.