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Rental to Personal with passive losses


tliberto

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Not until he sells the property in a fully-taxable transaction.  I think.  I didn't get much sleep.

If the losses were deferred due to his income being too high, can they be released if his income drops while the house is NOT a rental?

(I'm heavy into partnerships and S-corporations, so can't think straight about anything else.  Don't like the new deadlines!)

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Lion is correct, hope the statement below helps.

When the rental property with passive loss carryovers is converted to a principal residence,  the carryover losses can only be deducted to the extent of other passive income, or in the year the property is sold.

The $25K loss exception will no longer apply to the carryover losses in future years if the property is taken out of rental service.(Sec 469(i)(1). There can be no current year active participation in a rental activity in a year when the property is not used as a rental.

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Thanks to everyone who responded. My ATX software was somehow corrupted and deducting all of the carry over passive losses. I knew this was wrong,but the software would not let me correct the problem. I rolled over the return again to start all over. This time my ATX software handled it properly and did not deduct the carry over passive losses. Spent too much time on this return.

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