Sold Rental Property and TurboTax not Generating Form 8582

[user17736127972]

I sold my Rental Property and TurboTax Premier is not generating Form 8582 although it is populating the correct total losses (over years owned) on Schedule E line 22, which states "Deductible rental real estate loss after limitation, if any, on Form 8582" implying form 8582 is required.

Is this a TurboTax error or is form 8582 not required in year sold?

Since Schedule E states "on Form 8582" I would think the IRS would require it, especially since prior year losses are not on any other form.

[ReneV4 · Accepted solution]

No. This is not a TurboTax error. Form 8582 is generally not required in the year you completely dispose of your rental property.

TurboTax may not have generated the form for these reasons:

Under standard tax laws, rental real estate is considered a passive activity, meaning losses are suspended and carried forward if they exceed your passive income. However, when you dispose of your entire interest in a fully taxable transaction, the passive loss limitations no longer apply. All of the suspended losses you have accumulated over the years are allowed to be fully deducted in the year of the sale.

Because your losses are no longer subject to passive activity limits, you do not need to calculate the allowable limitation. Additionally, tax guidelines state that Form 8582 is not filed for any year that a taxpayer has an overall loss on the disposition of an entire interest in passive activity.

Since you are clearing the books for this property, ensure your basis on Form 4797 includes all of your improvements over the years and also verify that the allowable depreciation matches your total depreciation taken.

[user17736127972]

Thank you!