passive loss

[spencer]

Help me explain the "the voice on the phone" why his preparer is not allowing him credit for his passive loss (I'll call him back). Situation: Wages $79,000. Cap gain from sale of rental $85,000. Net loss on other rental units $34,000. I've already told him he can only deduct passive loss against passive gain. He has none. Am I ok on this? Is there more?
help and thanks.

[JohnH]

You could advise that he call his Congressman, but to be ethical you should also tell him that they aren't listening...

[Burke]

Help me explain the "the voice on the phone" why his preparer is not allowing him credit for his passive loss (I'll call him back). Situation: Wages $79,000. Cap gain from sale of rental $85,000. Net loss on other rental units $34,000. I've already told him he can only deduct passive loss against passive gain. He has none. Am I ok on this? Is there more?
help and thanks.

Well, we don't have enough info here to tell. You said he has cap gain from sale of rental. Was part of that 'rental loss' due to the property that was sold? If so, that can be taken. Also, passive loss from rentals can be deductible up to $25,000 if he meets the criteria on 8582. Does his AGI exceed $150,000?

[spencer]

Thank you, Burke

Well, we don't have enough info here to tell. You said he has cap gain from sale of rental. Was part of that 'rental loss' due to the property that was sold? If so, that can be taken. Also, passive loss from rentals can be deductible up to $25,000 if he meets the criteria on 8582. Does his AGI exceed $150,000?

His AGI is $164,000. The gain is from the sale of one rental. The loss is from the remaining rentals. I think he better get out of the rental business.

[Burke]

Then he has no deduction. The passive loss is suspended.

[BP.]

Then he has no deduction. The passive loss is suspended.

People seem to hate that. Had a guy trying out a mini-rant to me two days ago on the phone and in an email about how he is "getting scr**ed because he has to pay tax on money he doesn't have."

[TaxmannEA]

For years I have kept a supply of our congressman's business cards at my offices. When I get someone ranting about the "unfair" tax laws, I simply hand a card to them and urge them to contact someone who may have some effect on the process.

[Burke]

Sweet. Gotta try that.

[FEDUKE404]

Educating the uneducated

You need to explain to the guy that depreciation helps to create some of those wonderful rental losses along the way but also has the nasty habit of biting you in the backside upon disposition.

You know, the old, "but HOW can I have such a huge profit when I basically sold it for the same price I bought it?!?"

Just hope he does not come back with a "Well, I don't want to claim any more depreciation if that is what happens!" retort.

FE

[oceanlovin'ea]

client left

I had a client that had a couple of partnerships with rental property in them. In the beginning their income was low enough that they could take their looses. I even made the mistake of allowing the losses for a year or two when they shouldn't have gotten them. But I figured out what was wrong and tried to explain to them why they couldn't take their losses....high income was the biggest reason and no passive gain.
Well, they talked to someone else (not sure who if it was a CPA or just another accountant) who told them they could take the losses. I quoted from the book what it said. They wanted to take their chances. I told them I couldn't prepare a return and sign it if I knew it was wrong.

So bottom line....I still prepare the partnership returns. Then send them the K-1's and they take them to this other person who files their personal return. That is fine with me. I am not going to prepare and sign a return I know is wrong. I am sure that I posted on the board years ago when this happened.

If they want to go, you just have to let them go. You can't do something that isn't right.

Linda

[veritas]

Wondering

Isn't the gain on the sale a passive gain? Wouldn't you be able to offset the losses against the gain?