Rental Loss Carryover

[Duane Anderson]

Taxpayer had AGI over $150,000 in 2013 and 2014 so his rental losses were not able to be deducted. For 2015, his AGI is expected to be $40,000 and he does not want to use any of the prior or current year rental losses to reduce is AGI...Can prior and current year rental losses all be carried forward and zero used in 2015? Thanks,,Duane Anderson

[Kram BergGold]

Filing Status

If he is married, file them MFS and then the losses will not be allowed.
Otherwise I think he has to take the losses up to the limit.

[TaxGuyBill]

If he is married, file them MFS and then the losses will not be allowed.
Otherwise I think he has to take the losses up to the limit.

Excellent idea about the MFS!

I agree, the losses must be taken if they are allowed.

[TAX4US]

The mfs trick will sometimes work but you have to watch out for other items coming in to play. ie taxable ss benefits.

[FEDUKE404]

Issues with MFS & Form 8582

If he is married, file them MFS and then the losses will not be allowed.
Otherwise I think he has to take the losses up to the limit.

I agree on having to take the losses if MFJ...you cannot "opt out."

You might want to research the MFS option to be sure there are no "gotchas" to that approach. As others have mentioned, once you go MFS certain non-rental things get disallowed / modified.

Also, I believe you DO have to prepare a Form 8582 (or at least 2015 worksheet 3 of same). I think that technically MFS + living with spouse negates any active participation considerations, hence disallowing worksheet 1 but still requiring worksheet 3.

Good luck on the technical issues if you go that route. I've never been down that path. . .

FE

[Roland Slugg]

I've done that very thing for two different pairs of married clients in recent years ... doing it for two years in a row for one of them. The idea is based on Code §469(i)(5)(B).

As others have pointed out above, the MFS filing status will trigger many other limitations, so you really need to prepare pro-forma tax returns both ways ... i.e. MFJ and MFS. If you have good tax prep software, that shouldn't be too difficult in most cases.

If your client is single, he can't use this ploy, and the $25k special allowance is mandatory. There is no option to waive it.

[FEDUKE404]

Feb 14th consideration

Ah....I can see it now:

Young swain on bended knee: "Will you marry me, so I don't have to use my passive losses?"

FE