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Sale of rental property at a loss

Forum|Forum|6 years ago
March 3, 2020
11 replies
54 views

Hello everyone,

Is the sale of a residential rental property sold at a loss limited to $3,000.00 a year? My clients have a legitimate $70,000.00 (approx.) loss on the sale of a property that was rented since 2015 until time of sale (Aug 2019). Proseries is allowing the full amt to be deducted as an ordinary loss. This offsets the Schedule C income of almost the same amt. Is that correct or is the loss limited to $3,000.00 per year?

It shows Form 4797

Thanks for any help & more importantly your time.

ProSeries Professional

This topic has been closed for replies.

Best answer by sjrcpa

1231 loss is fully deductible from ordinary income. But pay attention to the other posts to see if there really is a loss.

abctax55

Level 15

Is i showing on Sch D or Form 4797?

HumanKind... Be Both

B

Bob GAuthor

Level 4

Form 4797

S

Skylane

Intuit Community Champion

Take a look at IRS pub 544 and instructions for f4797

If at first you don’t succeed…..find a workaround

B

Bob GAuthor

Level 4

I have tried to read IRS Pub 544 and 527 - not sure if I am limited to 3000 loss or treat as ord income. Thanks.

BobKamman

Level 15

When you write "rented since 2015" it raises the question of when it was bought. Not too many parts of the country have seen a decline in home prices in the last five years. However, five years ago there were people who were still underwater on the house they bought in 2007, so they decided to rent until they could sell. Give us some numbers. When was it bought, for how much? When was it sold, for how much? What depreciation was claimed?

sjrcpaAnswer

Level 15

1231 loss is fully deductible from ordinary income. But pay attention to the other posts to see if there really is a loss.

The more I know the more I don’t know.

B

Bob GAuthor

Level 4

Thanks it was converted from personal to rental in 2015. From the client, I am trying to find the lesser of her basis ($294,000) or the market value when it was converted in 2015 to a rental property. There will be a loss, but maybe less than originally projected.

Thanks again for your help.

BobKamman

Level 15

You should be able to figure out the FMV in 2015 from what she has been depreciating since then. Assuming, of course, that return was done correctly.

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