Suspended Loss on Rental Property Converted to Primary Residence

[David]

TP has had a suspended loss from a rental property that was converted back to his primary residence in 2011. The property has had a suspended loss carried forward on Form 8582. He sold the property in 2015. I want to make sure the suspended loss is handled correctly on the 2014 tax return.

I started using ProSeries (PS) this year. It appears that there is no method in PS to keep the suspended loss on Form 8582. The recommendation is to keep copies of the previous suspended loss worksheets to use when reporting the future sale of the property.

The suspended loss was reported on the 2013 8582 in the ATX program.

Doesn't the suspended loss have to be reported on the 2014 8582 in order to use the loss when reporting the sale on the 2015 tax return?

Thanks.

 

[Abby Normal]

No. The loss becomes non-passive upon sale of the property.

[David]

Thanks.

Maybe my question wasn't clear. I am asking if the suspended loss isn't reported on the 2014 8582, will that create red flags with the IRS when a suspended loss is taken when the property sale is reported on the 2015 tax return.

So when you say no, do you mean that the loss doesn't have to reported on the 2014 Form 8582?

Thanks for your help.

[Abby Normal]

If there are no 2014 8582 losses or income, the 8582 might not be needed. The loss is associated with the property, and that's all that really matters.

[David]

OK, thanks for your help.

[Abby Normal]

I just did one with inactive rental and the prior unallowed loss is showing on the 8582.

[michaelmars]

you need to keep the schedule E open in proseries so the 8582 has something to link to.  put the property in as it was including depreciation and make current business use -0- so no depreciation gets taken.  When sold the suspended loss needs to appear on E as an ordinary loss, not capital loss.

[David]

Yeah, 2013 showed it on the 8582 for me but I was using ATX then. Now I am using PS and the recommendation is to copy the 2013 8582 worksheets for future use and delete the worksheets in PS. 

The only way I can get it to stay on the 8582 is to keep Sch E but it will create an error if I put zero rental days.

If anyone else is using PS and knows how to get this done then please let me know.

Thanks.

[David]

Thanks, Michael.

I checked the Sch E worksheet and I don't see where I indicate zero business use. I entered 0 days rented but that generated an error message saying that a Sch E need s to have at least 15 days of rental use. I can't find a way to get rid of that error message or to do a workaround to allow the Sch E to remain with no activity.

The PS community says to delete the previous year 8582 worksheets to use when the property is finally sold and to not show the suspended loss on the 8582.

Thanks for your help.

[David]

I meant to say that the PS community says to make a copy of the previous year 8582 worksheets and then delete the worksheets in PS. When the property is finally sold, then use the prior year 8582 worksheets to report the suspended loss.

[michaelmars]

I meant -0- business use for depreciation purposes not on E.  What if you put 365 rental days and just left the rest of the form blank, would that work?  I just tried and I don't see any efile errors popping up

[David]

Thanks, Michael. That worked.