1040-US: Rental real estate activities and $25,000 special allowance on Form 8582

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Question

UltraTax CS has released all of the suspended passive losses for a rental real estate property that was completely disposed. Is there a special $25,000 allowance for rental real estate?

Answer

If your client actively participates in a passive rental real estate activity, you may be able to deduct up to $25,000 of the loss from nonpassive income. If the property was not disposed, UltraTax CS would limit the losses on Form 8582 in accordance with the special $25,000 allowance rules. However, in a complete disposition, IRC Section 469 (g) (1) states when a taxpayer disposes of entire interest in a passive activity, both current and suspended losses generated by that activity (as well as any loss on the disposition) become fully deductible.

Related topic: Passive loss information FAQs (1040)

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