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Suspended PAL in year of sale question

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    Suspended PAL in year of sale question

    Home eligible for partial 121 exclusion on sale of primary home that was rented in 2015 with a 19K suspended PAL. They occupied it at end and sold it in 2017. Do I need to due a schedule E in 2017 to release the suspended PAL? No sched E was filed for 2016. There was an 8582 generated in 2015 but none in 2016. I have entered a Sched E for 2017 with Zero rental days and it will put the loss on Line 17 of the 1040.
    I was wondering if this is the correct way to get this loss on the return.
    Thanks.

    #2
    I'm not sure if there is any actual direction on this matter.

    The possible options that I can think of are Schedule E or Line 21. I would lean towards Schedule E because if it WAS rented in 2017, the loss would show up on Schedule E.

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      #3
      Originally posted by BeachData View Post
      Home eligible for partial 121 exclusion on sale of primary home that was rented in 2015 with a 19K suspended PAL. They occupied it at end and sold it in 2017. Do I need to due a schedule E in 2017 to release the suspended PAL? No sched E was filed for 2016. There was an 8582 generated in 2015 but none in 2016. I have entered a Sched E for 2017 with Zero rental days and it will put the loss on Line 17 of the 1040.
      I was wondering if this is the correct way to get this loss on the return.
      Thanks.
      See if any of this may apply since you know all the facts in your scenario.

      http://www.taxwarriors.com/blog/bid/...residence-gain

      And

      https://www.journalofaccountancy.com...exclusion.html
      Last edited by TAXNJ; 05-03-2018, 08:48 PM.
      Always cite your source for support to defend your opinion

      Comment


        #4
        Originally posted by TaxGuyBill View Post
        I'm not sure if there is any actual direction on this matter.

        The possible options that I can think of are Schedule E or Line 21. I would lean towards Schedule E because if it WAS rented in 2017, the loss would show up on Schedule E.
        I think instructions for Forms 8582 and 4797 cover this, although it takes some digging, so I'm not going to try to quote all the relevant parts.

        As a practical matter, to answer your question about how to file, I would have the following:

        INPUT:
        In my software, I would (re-)create a Schedule E with the building/land asset. (I would have been able to mark the previous rental activity as inactive when taxpayer moved back in, so it would actually still be there for me). Force current depreciation to zero and prior deprecation to the correct amount, if necessary. I would enter prior year unallowed passive loss amount, and then indicate a complete disposition of the rental activity, as well as a sale of the asset(s).

        OUTPUT:
        Your Form 4797 will show the correct amount of unrecaptured Sec 1250 gain in Part III, and the total gain in Part I. Per instructions for Form 4797, you show your Sec 121 partial exclusion as a loss amount in Part I. These items flow automatically to Schedule D. Then, for the rental activity, the net income from disposition, and prior year unallowed passive loss, should also flow automatically to Form 8582, whence the passive loss will then flow automatically to Schedule E, and from there to 1040 Line 17.

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