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Common questions about Schedule E in ProSeries

by Intuit Updated 2 months ago

Get answers to frequently asked questions about the Schedule E:

  1. Open the Schedule E Worksheet.
  2. Scroll down to the Carryovers to 2023 Smart Worksheet.
  3. Enter any At-Risk Carryovers as a negative on line B.
  4. Enter any Passive Loss Carryovers as a negative on line G.
  5. Enter any Vacation Home Carryovers as a positive on line L and M.

Check the top of Schedule E for the following check marks:

  • (C) Active participation, or
  • (D) Material participation.

If those are checked and the loss still isn't flowing:

  • Check that the filing status isn't Married Filing Separate.
  • Check income. There's a phase-out starting at $100,000 and gone at $150,000.

From the Tax Help for the Other passive exceptions checkbox:

Follow these steps to view the Tax Help for the Other passive exceptions checkbox:

  1. Right-click on the Other passive exceptions checkbox.
  2. Select About Other passive exceptions.

A rental property with either a current- or prior-year unallowed passive loss is being sold in the current tax year to a related party. The loss shouldn't be allowed when the rental property is sold to a related party.

To prevent the loss on the sale of a rental property from being allowed in the year of sale:

  1. From the Forms menu, choose Select Form to access the Open Forms window.
  2. Type the letters EW and click OK to open the Schedule E Worksheet.
  3. Scroll down to the section of checkboxes under Check All That Apply.
  4. Uncheck Box H, labeled Complete taxable disposition.

ProSeries doesn't support limitation on business property sold to related party. Not checking the complete taxable disposition will simply disallow the losss for the current year and create Form 8582. If there is other income in the return, it'll still allow the loss. The only solution in this case is to override the Asset Entry Worksheet to zero out the loss for Form 4797.

  1. Open a new Asset Entry Worksheet attached to the Schedule E for the property.
  2. Enter the Date placed in service.
    • This the date the property was put in service for business use.
  3. Enter the Cost or basis.
    • This is the points dollar amount that is being paid.
  4. Enter L for the Type of asset.
  5. Enter the Percentage of business use.
  6. Enter the IRC section under which you are amortizing.
  7. At the bottom of the Asset Entry Worksheet, enter the Recovery period.
    • This is the remaining life of the mortgage.

ProSeries doesn't support a Home Office Worksheet for Schedule E, page 1. If the home office is for a Schedule E, page 2 activity, such as for a partner in a Partnership, the worksheet from IRS Pub. 587 should be used.

Tax Help states the following about the letters "NPA" printing to the left of line 26 on page 1 of the Schedule E:

"The Schedule E Worksheet could also be marked as "Other Passive Exceptions" which the program treats as a non-passive activity.

Pub 925, page 4 "Activities That Are Not Passive Activities"-

The following are not passive activities:

  • (3) The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental."

Vacation homes are also entered on the Schedule E worksheet in ProSeries.

  • ProSeries uses the Days rented at fair rental value and Days of personal use fields to determine if Vacation Home limitations apply. If they do, box G for Other passive exceptions will be checked automatically.
  • When determining if the property is a vacation home, the following special rule applies: Don't count as days of personal use the days on which the property is the taxpayer's main home, either before or after renting it or offering it for rent in the following circumstances:
    1. The taxpayer rented or tried to rent the property for 12 or more consecutive months
    2. The taxpayer rented or tried to rent the property for a period of less than 12 consecutive months, and the period ended because the property was sold or exchanged.
  • This special rule does not apply when dividing expenses between rental and personal use. In the year the property was converted to a rental property from the taxpayers main home (or vice versa), report the personal portion of mortgage interest and real estate taxes on the Schedule E worksheet for allocation between the rental and the personal portion after the property was converted.
  • If there was no personal use of the property but there were vacation home carryovers to the current year, enter zero in the number of days personal use and enter the income and expenses on the Schedule E Worksheet.
  • See the ProSeries tax help for more information.
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