Rental property like kind exchange with cash received and Passive losses unused on Form 8582

[sldcpa]

I have a client that did a like-kind exchange of rental property that had prior unallowed losses on Form 8582 from 2020 of $55,886. I did not advise client to do the like-kind exchange. He did the exchange in 2021 and received cash of $48,373. From my understanding, he should be able to use $48,373 of the unallowed losses to offset some of the $55886 gain on form 8824. My problem is on how to enter it correctly so that happens. I cannot check the box that it was a complete taxable disposition on schedule E worksheet or all of the Loss will be used. And I want to make sure that if there are overrides necessary that I can still e-file the return. Any help would be appreciated. Thanks!

[TaxGuyBill]

It's interesting that the program is not doing it.  Is the taxable gain of $55,886 showing up on 4797?

For some reason, the program is not recognizing that as passive gain.  The jump from the Asset Entry Worksheet to the 8824 to the 4797 must have made the program forget that it was passive.

Maybe there is a work-round, but offhand I can't think of a good one.

Unfortunately, I don't overrides are possible on the 8582.  So my first thought is that you would need to manually create a 8582 (such as from a PDF from IRS.gov).  You could attached that 8582 as a PDF to the e-filed return, but I might be hesitant to do that, and I think I would file by mail.

As for using the loss, you would just override line 22 of Schedule E to allow that loss.

[sldcpa]

Since I am doing a like-kind exchange, I am suppose to only enter the date of sale on the asset entry sheet and enter everything else on Form 8824. Then 8824 gain goes directly to Schedule D and does not go to form 4797.

[TaxGuyBill]

Okay, it has been a while since I've done a 8824, so I didn't quite remember how it flowed. 

But that is why the program isn't recognizing it as passive income, and I can't think of how you could force that.

[sldcpa]

I appreciate you trying to help me:)

Do you know if ProSeries technical phone number would be able to help in this situation?

[TaxGuyBill]

You could try, but I suspect it may result in more frustration than anything.

From what I've read, about 75% of support is rather clueless.  And while there are some really good people there, I am suspect they won't be able to help because the software is not set up for that.  Again, that is only a guess, so you certainly can give it a try.

[evankhut]

Hi, did you ever figure this one out? I am of no help here, but running into the exact same issue.

Thanks!