Question re: Form 4797, Sales of Business Property, Part I. High AGI clients sold rental properties in 2004 for a gain of $71,241. Prior year unused losses amounted to $11,139, reducing the gain to $60,282. Are real estate rental losses from prior years, unavailable due to high AGI, entered on Line 8, Nonrecaptured net section 1231 losses from prior years? If yes, is the same amount entered on Line 12, 17 and 18b as gain? Thanks.
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Add to Basis
Not the quintissential expert here, but I believe accumulated losses nondeductible because of passive loss rules are reported as an addition to the basis itself.
Others more qualified than I will either confirm what I say or correct me.
Good luck - Ron J. -
Passive losses and income
If those are the only two passive activities you will get the losses on Schedule E and the gains on 4797 to D.Comment
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prior year sec 1231 losses
These losses are tracked for 5 years so that any gains taken will get taxed at ordinary income rates to the extent that you have taken such losses in the past five years. Hopefully your software has tracked these and will split out any gain that needs to be taxed at ordinary rates, or there would be a spot to plug in this carryforward if this is a new client. Essentially what is happening is if you have benefited from ordinary losses you are going to have potential of recapture at ordinary tax rates for 5 years.
Passive losses that were not taken in prior years are released at sale, and would go on sched E, however, if the property is exchanged then the passive losses would not be released and would be carried forward in the property received in the exchange.Last edited by abby; 11-02-2005, 11:11 AM.Comment
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