The previous tax preparer never said it was the final year K-1, so all the previous years passive loss carry overs just disappeared.  We filed an amended 2017  return to indicate it was a final year K-1 to bring forward the prior year passive losses   Then we amended 2018 as well, since now the loss was carried forward.      

The IRS letter stated they looked at the original return that was filed and no election was made to forego the 2017 operating loss carryback.  Any election filed with the 2017 1040x ( filed May 2020) was filed late and can not be allowed.  They want the 2017 loss carried back to the correct year.   

So the previous year passive loss carryovers not utilized on the 2017  1040X return become NOL losses and we have to amend 2015 and 2016?  and start with the total NOL from the 2017 return   on the amended 2015 return and keep carrying it forward?       It doesn't matter what type of passive loss it was?   or that it was accumulated over many years?