822
The following diagnostic is generating:
The basis of credit property sold and the credit carryover must be adjusted by the amount of the original basis reduction of the property to the extent the credit was disallowed by the passive activity rules.
Solution:
This diagnostic is generated when the election is made to increase the basis of credit property in the General Business & Passive Activity Credits screen (screen 34, code 17). This diagnostic directs the preparer to do two things: 1. Adjust the basis of the credit property sold 2. Adjust the credit carryover If the taxpayer sold the entire interest in a passthrough entity and recorded the sale as a Schedule D transaction, the basis of the property (basis of the investment in the passthrough entity) must be adjusted by the original basis reduction. If there is a credit carryover in the ""All other passive activities"" field (screen 34, code 42), it must be adjusted by the original basis reduction. NOTE: The diagnostic will not go away after the adjustments are made. It is not an e-file diagnostic and will not affect the ability to e-file.
