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IRC 179(b)(3) Limitation and Passive Activity Loss

Level 1

I have a taxpayer that has multiple passive activities with overall losses being carried forward. One passive activity has an ordinary business loss and an IRC 179 loss carryover. This year, the taxpayer has net passive income but other significant non-passive losses that exceed the net passive income from all activities. Proseries appears to correctly allow the ordinary business loss and also freed up the IRC 179 loss on form 8582 and deducted both in the aggregate on page 2 of Schedule E.  Section A Passive Activity Adjustment to Income or Loss shows the allowance of both Ordinary Loss and Section 179 Expense. However, since the taxpayer has an overall "Taxable Loss" from all trades and business activities (both passive and non-passive) I believe the IRC 179 loss that was freed up for passive activity purposes should still have been suspended under IRC 179(b)(3) and Treas Reg 1.179-2(c) with the loss tracked separately as an IRC 179 loss carryover.

Technical support agreed with my analysis and the only way to fix it appears to be to eliminate the IRC 179 carryover out of the system and manually track it and enter it after making manual calculations  each year.

Has anyone else experienced this issue within Proseries? If so, is there another workaround?

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