TurboTax & taking passive losses in the year you dispose of your entire interest in the passive activity?
Friday, February 6th, 2009
Generally, the passive activity loss rules state that you can’t get a tax benefit this year for losses you have from passive activities unless you also have income from other passive activities.
However the IRS also says :
“Any passive activity losses (but not credits) that have not been allowed (including current year losses) generally are allowed in full in the tax year you dispose of your entire interest in the passive (or former passive) activity.” Please see IRS Publication 925 (http://www.irs.gov/pub/irs-pdf/p925.pdf) page 9 under Dispositions.
This is the question.
In 2007 we “disposed of your entire interest in the passive (or former passive) activity” How do we tell TurboTax we disposed of our entire interest and want to take all current and prior years’ passive losses. I’ve entered the K-1 for this investment as well as the long-term gain on the sale. In neither place did TurboTax ask about unallowed passive losses
Thanks
DUANE
