Form 8852 - Suspended Rental Loss (PAL) Question

[NSNM]

Taxpayers - MFJ

Real Property - A:
Bought in 01/2005
Used as Principal Residence from 01/2005 thru 09/2009
Converted to Rental Property from 10/2009 thru 08/2011
Reconverted to Principal Residence from 09/2011 thru to-date

Real Property - B:
Bought in 10/2009
Used as Principal Residence from 10/2009 thru 09/2011
Sold at loss in 09/2011

Loss treatment on Form 8582:

Year 2009 ( 3 months rented) - MAGI $107000 - Loss ($3700) Fully deducted
Year 2010 (12 months rented) - MAGI $127000 - Loss ($5600) Fully deducted
Year 2011 ( 8 months rented) - MAGI $151000 - Loss ($4000) Suspended (MAGI limitation)

Since Rental Activity no longer exists, and the Rental Property was
converted to Principal Residence, what happens to suspended loss (4000),
as the property itself NOT sold ?

Do the conversion to Principal Residence is considered "ENTIRE DISPOSITION
OF PASSIVE ACTIVITY", and reportable on Form 4797 to deduct entire loss ?

Taxpayers do not own any other real property.
And they are NOT Real estate professionals.

Anybody wants to give a thought to the tax loss situation. Thanks.

[appelman]

The losses remain suspended

Until the property is fully disposed of in a transaction to an unrelated party in which all realized gain or loss is recognized.

[Kram BergGold]

And

If the Taxpayer's MAGI ever drops below $150,000 the suspended passive losses can be triggered as well.