Sale of rental property at a loss

[Bob G]

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.

[abctax55]

Is i showing on Sch D or Form 4797?

[Bob G]

Form 4797

[Skylane]

Take a look at IRS pub 544 and instructions for f4797

[Bob G]

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]

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?  

[sjrcpa · Accepted solution]

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

[Bob G]

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]

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.  

[sjrcpa]

I  think that's a big assumption. 😀

[Bob G]

I thought this was a good response.  Surprised that you turned at a later post w/o having all the facts.

You were wrong about your later comment.  I couldn't remember what I did 5 yrs ago.

[sjrcpa]

If I am wrong, so be it. Your original question indicated you were not knowledgeable in this area.