PAL adjustment

[JenMO]

Client sold rental residential real estate at a huge loss. Now forms are showing PAL adjustment, a loss carryover (not a $3000 capital loss) Not sure what's going on. Can someone explain?

[Gary2]

What does the 4797 show, and where?

[JenMO]

Part 1 shows a $63,000 loss, on the last line it prints "PAL adjustment and $34,000 in under column g as a positive number. Line 7 shows ( -$29,000) Then that amount goes down to part II line 11 on down to line 17 and line 18b. It then goes to line 14 on the 1040. What's happened to the PAL adj of $34,000. Did we lose that loss?

[Gary2]

Is this his only rental real estate? Did you mark it as a complete disposition of a passive activity?

[JenMO]

NO, in the software imput part, I didn't but now I have, and the whole loss is showing up, and carrying down as ordinary loss. Is this right?

[Roland Slugg]

Yep, sounds right now. The complete disposition of a passive activity in a taxable transaction releases all current year and prior year unallowed losses.

[Rlmea]

PAL Losses on sale of rental on a MFS return

If the taxpayers are filing MFS, and sold their rental for a loss (50% allocated to each spouse), is the loss allowed? They also each have suspended losses from years past.

Robin

[Burke]

If the taxpayers are filing MFS, and sold their rental for a loss (50% allocated to each spouse), is the loss allowed? They also each have suspended losses from years past.

Robin

Same answer. If it is a complete disposition, 50% of all loss should be allowed to each.