I have a client who has 2 rental homes. They have generated losses of 22,000 and 25,000 over the past two years. She gets no tax benefit for the losses, since her income is minimal. (her taxable income is -0- without the losses). I know residential rentals are passive activities. Because of the $25,000 loss allowance per year, would the fact that she derived no benefit from the loss allowance create an NOL for her?
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Just my 5 cents, no basis really. I think these losses create a NOL, which is automatically carried back if no timely election to carry forward was made. -
Yes, the rental losses are considered business losses and contribute to an NOL. If your client has no other income in past years, she may not get the benefit of an NOL carryback or of the carryfoward, but the rental losses are business.
MaribethComment
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Not sure about that
How do they create an NOL when:
1. as a rule rentals are not considered a business unless client is a RE pro
2. don't rentals allow a $25000. loss per year, not NOL? kaimanaDIY programs are not a replacement for a good tax proComment
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You might want to read Pub 536 (Net Operating Losses for Individuals, Estates and Trusts). It starts out ...
To have an NOL, your loss must generally be caused by deductions from your:
• Trade or business,
• Work as an employee,
• Casualty and theft losses,
• Moving expenses, or
• Rental property.
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