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Friends:
In 2024 Client incurred $25,000 in expenses for a rental property but had zero rental income, creating an unallowed income loss of $25,000. Unfortunately, she sold the property in 2024, so there is no future income against which to apply the unallowed income loss. I understand that there are ways that unallowed losses can be used. Can anyone help me understand those possibilities?
For what its worth, she had a $40,000 capital gain on the sale (though she had to bring money to the table because she had taken out equity).
Thanks.
Micah
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Research "disallowed passive losses" and "sale of passive activity" before you hire a tax advisor.
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@msindc1 wrote:
she had a $40,000 capital gain on the sale
She had $40,000 of income from the rental. Passive losses can be used for that amount.
If it was sold in a "fully taxable transaction", all passive losses from the property are usable.
