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My taxpayer has three rental properties. One was sold in 2020. I want to dispose of that rental, but when I do, the losses on the other two rentals are triggered and used. Is there any way to dispose of one rental without triggering the losses on the other rentals, which are still active? My client has a high income and has accumulated losses for years, but doesn't want to take losses on rentals that are still active.
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Review F 8582 and how gains on sale of properties trigger suspended losses.
Your client doesn't get to pick/choose.
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Yes, the sale of that property would trigger the suspended losses, but I have not made any grouping of the three rentals together. Why would the sale of one rental trigger losses on the others?
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Again... review Form 8582 and how it all flows.
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Passive vs Passive, doesn't matter it they are grouped,
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If the house that was sold was sold at a gain, you now have Passive Income.
The suspended Passive Losses are used against that Passive Income. You don't have a choice to not use it.
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Yep, I'm fine with one property generating gains that can be used to then unlock the accumulated losses for that property. What I'm facing is three rentals, all with accumulated losses. One rental is sold, yet the accumulated losses for all properties is now unlocked. I didn't sell the other properties so why do I get to use those losses?
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As I said above, you have Passive Income.
Passive Losses are generally applied against ANY Passive Income, not just the income from that specific activity (I think PTPs and/or MLPs may follow different rules).
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"....I didn't sell the other properties so why do I get to use those losses?"
HAVE you looked at F.8582 and read the directions?
You "get" to because that is what the law says. And has said for a long time (1986 ?)
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Depending on the amount of the gain on sold property A, all the losses on A will be used, even if more than the gain. Losses on B and C will only be used, proportionately, if the gain on A is more than the losses on A.
See worksheets with F8582.
