Help - Where to enter disallowed related party loss?

[BulldogTom]

Taxpayer sold rental home to sister. Has a small loss. I know the loss is not allowed. Where in the program do I put this? I thought it had to be the 4797, but I don't see a place. Do any of you know how to do this in ATX?

Thanks

Tom

Lodi, CA

[indyscott]

Tom, offhand, I'd say that you just show disposition of the property for the amount of the taxpayer's basis. T's basis becomes the transferee's basis. Amount of $ trading hands is immaterial.. that's what the rule disallowing losses from sale to related parties is all about, I think. I could be all wrong.

[BulldogTom]

I did not think about adjusting the basis.

What I did was to add another line to the 4797 for a gain equal to the amount of the loss and described it as related party loss.

I like your idea. I am hesitant to play with the basis though. When I read the master tax guide, the losses can offset a gain in the future for the purchasing party. But they calculate their gain, and then offset it to the amount of the disallowed losses. That does not sound like a basis adjustment to me.

I am just talking out loud because I don't know for sure.

Thanks for your thoughts.

Tom

Lodi, CA

[indyscott]

I think I'd show the amount realized from the "sale" as an amount equal to the T's basis, regardless of how much $ he actually got. That way he doesn't show a loss. The sister takes the property and assumes her brother's basis, again regardless of the amount of $ trading hands. I think the underlying concept is that $ in one family member's pockets are indistinguishable from $ in another family member's pocket. It's like a really large pair of pants.. I better sign off, before I get really silly. Hopefully someone else will chime in. (It is 3 hrs later here in Indy than it is in CA)

[Pacun]

Pull down the menu and select personal and the loss will become personal and it will not be transferred and carried over.

[BulldogTom]

I thought about that (it was the first thing that I tried) but I don't believe that is the way to go. I think I want the 4797 tracking because those losses become deductible to the sister if she ever sells for a gain. Right now she is planning to use as a personal residence (which on sale makes the whole point moot), but if she turns it back to a rental and sells for a gain down the road, those losses can offset the gain. If I mess with the basis or make the loss personal and don't have a paper trail of the amount, 10 years from now it might matter. Who knows, one of you might be her tax preparer and want to save her some tax $$$.

Thanks for the idea.

Tom

Lodi, CA