Sale of Rental Property to Related Party

[Mactaxes]

Hello:

We have a client who sold their rental property at a loss to their parents in January 2019.  I understand that they cannot take any losses on this sale, including their prior year unallowed losses, but Proseries is having a fit when we enter the info on the Disposition Worksheet and wants to take the losses on Schedule E & 4797.  We feel that this "disposition" should be reported on their Return, but there doesn't seem to be a clean way to do this without overriding several items, which prevents e-Filing.  Am I missing something here?  

[Just-Lisa-Now-]

Entering a disposal date with no price will stop depreciation as of that date and not put anything onto the 4797.  You may have to make manual entries for depreciation recapture (Im only guessing that still comes into play with a related party transaction...Ive never had one so Im not completely clear on the how it works overall)

[Mactaxes]

Thank you Lisa!  Good advice.  We've never run into this problem with a related party sale either...

[Cropredy CPA]

If a rental property has disallowed losses and is sold to a related party, go to the Schedule E Worksheet for the sold rental property and scroll down to the section called Carryovers to 2021 Smart Worksheet and change Line G - Schedule E suspended loss to 0.

This will keep Schedule E from giving the suspended losses when it shouldn't due to the sale to a related party.

[abctax55]

@Cropredy CPA  - I hope that they figured that out two years ago.... 🙂

[Cropredy CPA]

lol . . . yeah, I noticed that it was an old question.  But someone may need to find that now, so I thought I would post it anyway.  🙂