All Forum Posts by: Shawn Chase

hello Natalie,  Can you explain what you mean? Is the Adjusted Base - Amount Realized =Capital Loss considered a passive loss in a sale situation or are you just referring to any loss I may have had due to expenses vs income on the rental property (i.e. the $2,000 loss carryover and any other potential loss due to expenses vs income from this year)?    

I have been reading about depreciation recapture and understand it pretty well.  However, there is one question I cant seem to find an answer to.  

Upon sale of a rental property I find that I have a capital loss.  However, my depreciation recapture calculations show a gain.  I realize I need to pay the 25% tax.  Now I am at my question.  Am I allowed to reduce my depreciation recapture tax owed by my capital loss and/or any passive loss carryover from previous years?  

For instance, the original purchase price of the property plus closing costs and improvement costs = $100,000 (Adjusted Base).  I sell the property for $90,000 (minus closing costs) Amount Realized....so I have a capital loss of $10,000.  I also have passive loss carryover from previous years of $2,000

Now calculating depreciation recapture.  my adjusted base is $100,000 and my depreciation is $30,000 so my Adjusted Cost Basis is $70,000.  Subtracting the Adjusted Cost Basis from the Amount Realized I have a gain of $30,000.  When I apply the 25% tax I show a tax of $7,500 that needs to be paid.  

Can I use the $10,000 capital loss and/or the $2,000 to offset the $7,500 that I owe so I do not need to pay anything.  Further, can I use any loss left over to offset any personal taxes owed?  I cannot claim to be a realestate professional so have not been able to offset personal taxes in the past.  

Thanks for your advise