Passive loss on sale of rental property.

[pbuckman]

I have a young couple that sold a rental property to an unrelated party at a loss in '21. Together they make over $150,000. They rented the property for 6 months in '21 with at a loss and have a loss carryforward from '20 on the property.  My ProBasic is treated it as all as a un-allowed passive loss

It is my understanding that when they dispose of the property they should be able to deduct the related passive losses.  I entered the sale of the property in the asset disposition section of the asset.  This was carried forward to forms 8582 and 4797.   So the program knows that the property is being disposed.

If I don't complete the disposition section of the asset worksheet and instead enter the sale only on form 4797, I can get the program to recognize the loss on the sale of the property.  However, that still leaves the related passive rental losses.  

Can anyone help?

[dkh]

There is a check box on Sched E Worksheet - Taxable Disposition  - is that checked?