Carryover Losses from Multifamily Syndications

[Rowena A.]

Am I wrong???

In 2021, I invested in multifamily syndications while maintaining non-real estate professional status. Subsequently, in 2022, I transitioned to full-time real estate activities and am now eligible to claim real estate professional status.

My specific question pertains to the carryover depreciation from my syndication investments in 2021. Can these passive losses be utilized against the passive distributions (income) I received in 2022 from the syndication investments made in 2021?

My understanding is that passive losses in 2021 can be carried forward and released to offset passive income in 2022. However, I would greatly appreciate any tax experts in confirming and providing any additional insights into this matter.

Appreciate if any tax experts could help with my question. TIA!

[Sean O'Keefe]

@Rowena Agustin based on what you say, your losses from the syndicate in 2021 were passive losses. Any losses that you didn't utilize to offset passive income in 2021 get carried forward into 2022 and can be used to offset passive income in 2022. 

It doesn't matter that you are a REPS in 2022. REPS for 2022 impacts real estate income/losses in 2022 and you still need to materially participate in the activity.

The 2021 losses that you carried forward to 2022 still remain passive regardless of whether you qualify as REPS in 2022.
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*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.