TaxGuyBill
Level 15

The losses are fully allowed on the 2017 tax return; they are not carried to 2018 (assuming it was sold in a "fully taxable transaction").  If the losses were not recognized in 2017, then the 2017 tax return needs to be amended.

If you prepared the 2017 tax return, you did some things wrong.  You needed to check box "H" on the Schedule E worksheet to release the Passive Loss Carryovers.  The are fully allowed in the year of the sale, regardless of income (assuming it was sold in a "fully taxable transaction").

As for the loss on the sale, that too should have been fully allowed.  The sale should have been reported on Form 4797, and the loss should not be limited.  I am unsure what you did there.  Did you accidently report it somewhere else, such as Form 8949/Schedule D?

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