Can I deduct passive losses the year my rental property sold?

[Chris L.]

I sold my NJ rental property in 2017. I also had a passive loss for the rental property in 2017. With the sale of the rental my income was over 150k. I recognize that one can not take a passive loss if their income is over 150k; however, from what I have read, it states that if you dispose of/sell your rental that you can deduct the passive losses the year you sell. My question is this, can I deduct my passive losses that occurred in 2017 on my 2017 taxes or does it get rolled over to 2018 because my income is too high? I have heard conflicting info. My accountant is showing rental property passive losses to be rolled over to 2018 on my tax docs and I don’t think that is accurate. I reside in NC and the property is in NJ. Any input would be greatly appreciated.

[Logan Allec]

@Chris L. I would point your accountant to Section 469(g).  The gist of it is that when you dispose of your entire interest in a passive activity in a fully taxable (as opposed to a tax-deferred) transaction to a non-related party, i.e., selling a non-grouped rental property in a taxable sale to a non-related party, both current and suspended passive activity losses generated by that activity can be deducted.  The activity is essentially no longer subject to the passive activity rules, so even if your modified AGI exceeds $150,000, you can take the suspended losses in year of sale.