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Old 04-04-2011, 08:47 PM
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Thumbs down Can Suspended Losses from Rental Property converted to Personal Residence be released upon sale of another rental property?

Can the approximately 40K of Suspended Losses @ 12/31/09 from a Residential Rental Property, converted to a Personal Residence as of 01/01/2010, be released and used to lower the gain from the sale of another multi-unit residential rental property sold in Sept 2010? This is my first question for the Tax Guru. Hope you can help me with this one. Is there any IRS precedent or rulings on this?



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Old 04-05-2011, 03:59 AM
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“Can the approximately 40K of Suspended Losses @ 12/31/09 from a Residential Rental Property, converted to a Personal Residence as of 01/01/2010, be released and used to lower the gain from the sale of another multi-unit residential rental property sold in Sept 2010?”--->Iguess ; in the case of a rental property converted to a residence, there would not be any current income from the activity which could absorb suspended passive losses carried forward to years prior to the year of sale of the residence. The suspended losses would be deductible in the year of a taxable disposition of the former rental property, now residence. A sale of a residence is a taxable disposition, even though there would be a gain exclusion if it is a principal residence. Any excess loss on the disposition of a former passive activity is treated as active not passive.



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