Welcome Guest. Register Now!

09-18-2015, 01:39 PM
 Junior Member Join Date: Sep 2015 Posts: 10
Unused rental property losses

Since 2005, I have had over 150k in income from a business that flows through to my personal return in a K1. In addition, I have a rental property.

My cost basis of my rental in 2005 was 250k

Every year my rental P&L was:

Income 12,000
Expenses 12,000
Depr 7,500

Net loss 7,500 that was disallowed due to my income level for 10 years

In 2015, my cost basis is now 175k (250-75) and my NOL carry forward is 75k (7,500x10)

If I sell this property in 2015 for 175k (FMV is 250k if that matters at all),

1). Is net gain/loss on sale \$0 since my sale price of 175k = cost basis of 175k?

2). Do I have no depreciation recapture issues since there is no gain on sale?

3). What happens to my 75k NOL that has carry forwarded from 2005? Since I have no other rental properties to distribute the loss to do I finally get to use this NOL against my K1 business income?

4). Does the IRS care I am selling it 75k below FMV?

09-18-2015, 07:17 PM
 Moderator Join Date: Oct 2010 Posts: 5,233
Since 2005, I have had over 150k in income from a business that flows through to my personal return in a K1. In addition, I have a rental property.

My cost basis of my rental in 2005 was 250k

Every year my rental P&L was:

Income 12,000
Expenses 12,000
Depr 7,500

Net loss 7,500 that was disallowed due to my income level for 10 years=====>>Correct.

In 2015, my cost basis is now 175k (250-75) and my NOL carry forward is 75k (7,500x10)

If I sell this property in 2015 for 175k (FMV is 250k if that matters at all),

1). Is net gain/loss on sale \$0 since my sale price of 175k = cost basis of 175k?======>>Correct

2). Do I have no depreciation recapture issues since there is no gain on sale?=====>.Correct also no sec 1250 recapture as you have 75K of NOL carry forward .

3). What happens to my 75k NOL that has carry forwarded from 2005? Since I have no other rental properties to distribute the loss to do I finally get to use this NOL against my K1 business income?===>>As said previously, no UNLESS you have other Passive active income;

4). Does the IRS care I am selling it 75k below FMV?===>I do not think so as it is up to your free will if you are selling it 75K below FMV UNLESS you intentionally avoid paying tax liability to the IRS. I mean IF only IF the IRS challenges you on the sale below FMV, then you need to prove the sale of the rental home below FMV is not to avoid paying sec 1250 ordinary taxes to the IRS.

 Posting Rules You may not post new threads You may not post replies You may not post attachments You may not edit your posts vB code is On Smilies are On [IMG] code is On HTML code is OffTrackbacks are Off Pingbacks are Off Refbacks are Off

 Similar Threads Thread Thread Starter Forum Replies Last Post Unused rental property losses Azref2627 Miscellaneous 0 09-18-2015 01:38 PM Unused rental property losses Azref2627 Investment Strategy 0 09-18-2015 01:38 PM Income exceeds \$150,000. Why doesn't Turbotax offset passive losses from one rental property against passive income from second rental property? aboniadi Rental Real-Estate 4 03-17-2014 02:15 AM Carryover to Estate of Unused Personal Capital Losses? Reno98 Capital Gains 0 02-12-2014 12:35 PM Can Suspended Losses from Rental Property converted to Personal Residence be released upon sale of another rental property? mountainaire Rental Real-Estate 1 04-05-2011 03:59 AM

 » Categories
 Individual   Corporations   Forum for CPAs   Financial Planning
 » Recent Tax Q&A