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Level 2
October 3, 2026
Question

ProSeries – How to handle suspended passive losses on related-party bargain sale/gift of rental property

  • October 3, 2026
  • 4 replies
  • 95 views

I am preparing a 2025 MFJ return. The taxpayers transferred an entire rental property in a transaction that was part sale/part gift. One of the transferees is a related party, so I am not treating this as a fully taxable disposition that releases all suspended passive losses.

The rental has a $51,753 prior-year suspended passive loss carryover. ProSeries is currently carrying the entire $51,753 into the Schedule E worksheet and Form 8582, and because the taxpayers' AGI is above the special allowance phaseout, Form 8582 is allowing only the current rental income of $8,472 to absorb part of the suspended loss and carrying the remaining $43,281 forward.

I need to determine how ProSeries should handle the portion of the suspended PAL attributable to the gift/related-party portion of the disposition.

Is there a specific ProSeries entry for a related disposition passive loss carryover, or does the preparer need to manually split/reclassify the prior-year PAL carryover between the taxable-sale portion and the related-party/gift portion?

I see the Related Dispositions section on the Schedule E Activity Summary Smart Worksheet (lines J–N), including line L “Passive carryover loss,” but I cannot find an input field or cross-reference that feeds an amount into that section.

Where exactly in ProSeries Professional should this be entered?

4 replies

Kathi_at_Intuit
Moderator
October 6, 2026

Hi ​@MTROT2010 great to see you in the community! Thanks for posting about how to handle suspended passive losses. If you know what forms should be generated for this, ProSeries Support would be able to assist with input.  

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MTROT2010Author
Level 2
October 6, 2026

I have already determined the correct tax treatment and amounts. I am not asking for tax advice. I need help determining where in ProSeries Professional to enter the amounts so Form 8582 allows an additional $3,613 of suspended passive loss for 2025 while retaining $21,641 as the passive loss carryforward. Checking Complete Taxable Disposition releases the entire PAL, which is not correct. I also need the corresponding AMT amounts to be $3,584 released and $21,470 carried forward. Can you show me the ProSeries input or supported method for producing those results?

Intuit Community Champion
October 7, 2026

Not sure, but I believe you have overriding in your future 😊

Just-Lisa-Now-
Intuit Community Champion
October 7, 2026

If you scroll down down down the Sch E worksheet, you’ll find a table for 2025 carryovers, you may be able to make the adjustment right there.

 

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪