8582 separating part of the passive losses?

[michele]

husband had lucrative real estate partnership It became passive when he  Becomes totally disabled and placed in the nursing home. Tax year 2020 partnership is placed in wife's name. Wife dies unexpectedly in 2021 so she is entitled to losses for the years in her name.  He is still alive and the prior losses for him should stay with him.  . So program was marked for a number of years for the taxpayer then the last couple years it was marked for spouse. but marking it final for her pulls all the losses. and does not separate them. Am I going to have to remove his prior losses then show them on a future return for him. I hate doing that.  The partnership is still ongoing as it went in the daughters name. Don't know how the lawyer got this all transferred around.  Never anything dull at our office.

thanks

Michele

[PhoebeRoberts]

If the husband was active in 5 of the last 10 years, the partnership was still active to both him and the wife. Death doesn't free up passive losses unless the step-up in basis is smaller than the accumulated passive losses. Unused passive losses associated with property transferred by gift adjust basis. 

I agree that getting the tax return presentation right will require multiple judicious overrides, plus a side schedule or two done in Excel. I don't think you've reached the appropriate conclusion as to what the right tax return presentation is, though.