Level 5

Question

The entire capital loss is being deducted

Forum|Forum|1 year ago
May 13, 2025
3 replies
21 views

My client sold two rental properties and the combination of sale turned into like $27k in loss. The entire loss is being deducted (through schedule 1) instead of just $3k being deducted and the rest carried forward to next year. What am I doing wrong here? I did not select real estate professional to cause this.

Thank you

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George4Tacks

Level 15

More information would be helpful.

What kind of numbers are on 4797?
What kind of numbers are on Schedule E?
What kind of numbers are on 8995-A?
What kind of numbers are on 8582?
Was either sale an investment sale?
What kind of numbers are on the worksheets for things like Unrecaptured Section 1250 gain?
Like many other items ...

Answers are easy. Questions are hard!

abctax55

Level 15

And...

Sch D

Form 8949

Form 8582

HumanKind... Be Both

B

BabakAuthor

Level 5

I used the disposition part of the Depreciation section to report the sale not the Schedule D.

BobKamman

Level 15

What you are doing wrong is thinking rental property is a capital asset, to which the $3,000 annual loss limit applies. You can claim all of the loss, in the year of sale, on a noncapital asset.

Pub 544 might help (see Page 20).

https://www.irs.gov/pub/irs-prior/p544--2022.pdf

sjrcpa

Level 15

Yep. You've got a 1231 loss. Look at Form 4797.

And if you had suspended PALs for these properties they get freed up, too.

The more I know the more I don’t know.

B

BabakAuthor

Level 5

suspended PALs were freed up which is really good, but rental property gain/loss is not considered capital gain/loss?

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