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pwapub
Returning Member

Spouse is a real estate professional, we have active real estate NOL that can't be claimed this year (2017 because I earned too much). How do I record the NOL?

I am amending a 2017 return. I earned well over 150K that year and have a spouse who is real estate professional. We are both actively involved in the management and maintenance of our real estate assets (and my spouse buys and sells real estate). One property is owned in our names and one in a multi partner LLC (My spouse and I). Losses from the LLC amount to around 48K. Losses from the property not in the LLC was around 2K.

 

On Schedule E, for the property not in the LLC:

Line 21 is -2,159 (i.e., a net operating loss)

Line 22 is Deductible rental real estate loss after limitation = 0  (i.e., the loss from this property was not applied).

It is reported in Form 8582 as an un-allowed loss.

There appears to be no mechanism or form in Turbotax that states this a (non-passive) carry forward.

 

Is this a (non-passive) NOL carry forward?

If so - should I record it anywhere else for use in later years?

 

 

2 Replies
Mike9241
Level 15

Spouse is a real estate professional, we have active real estate NOL that can't be claimed this year (2017 because I earned too much). How do I record the NOL?

for married couples filing a joint return, the spouses activities can be combined to determine whether they materially participate in their rental real estate activities. but one spouse must be the 50% rule and 750 hour rule.

(7)Special rules for taxpayers in real property business

(A)In general if this paragraph applies to any taxpayer for a taxable year—
(i) paragraph (2) shall not apply to any rental real estate activity of such taxpayer for such taxable year, and
(ii) this section shall be applied as if each interest of the taxpayer in rental real estate were a separate activity.
Notwithstanding clause (ii), a taxpayer may elect to treat all interests in rental real estate as one activity. Nothing in the preceding provisions of this subparagraph shall be construed as affecting the determination of whether the taxpayer materially participates with respect to any interest in a limited partnership as a limited partner.
(B)Taxpayers to whom paragraph applies. This paragraph shall apply to a taxpayer for a taxable year if—
(i) more than one-half of the personal services performed in trades or businesses by the taxpayer during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and
(ii) such taxpayer performs more than 750 hours of services during the taxable year in real property trades or businesses in which the taxpayer materially participates.
In the case of a joint return, the requirements of the preceding sentence are satisfied if and only if either spouse separately satisfies such requirements. For purposes of the preceding sentence, activities in which a spouse materially participates shall be determined under subsection (h).

 

so I believe there should be no PAL limit on the schedule E property.

 

possibly bad news.  unless you live in a community property state the LLC was required to file a partnership return for each year it had activity. the penalty can be as much as $5,000 per year.

pwapub
Returning Member

Spouse is a real estate professional, we have active real estate NOL that can't be claimed this year (2017 because I earned too much). How do I record the NOL?

Hi Champ,

Thanks. Based on your certainty that she should be considered a professional - I figured out the problem. I had to change an obscure  checkbox that prevented her from being considered a real estate professional.

 

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