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My client sold two rental properties and the combination of sale turned into like $27k in loss. The entire loss is being deducted (through schedule 1) instead of just $3k being deducted and the rest carried forward to next year. What am I doing wrong here? I did not select real estate professional to cause this.
Thank you
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More information would be helpful.
- What kind of numbers are on 4797?
- What kind of numbers are on Schedule E?
- What kind of numbers are on 8995-A?
- What kind of numbers are on 8582?
- Was either sale an investment sale?
- What kind of numbers are on the worksheets for things like Unrecaptured Section 1250 gain?
- Like many other items ...
Answers are easy. Questions are hard!
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What you are doing wrong is thinking rental property is a capital asset, to which the $3,000 annual loss limit applies. You can claim all of the loss, in the year of sale, on a noncapital asset.
Pub 544 might help (see Page 20).
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I used the disposition part of the Depreciation section to report the sale not the Schedule D.
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suspended PALs were freed up which is really good, but rental property gain/loss is not considered capital gain/loss?
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It's a Section 1231 gain or loss.
As I said before-look at the Form 4797. And read its instructions.
This is a pretty basic tax concept that hasn't changed in umpteen years.
The more I know the more I don’t know.
