All Forum Posts by: Peter Lampione

Thanks @Paul Moore, definitely agree on that. It looks like what my accountant is doing is correct, I was just surprised because multiple people have said you can offset all gains with losses, included gains in box 9a. I even tried it on some tax software myself and confirmed it. Unfortunate that my syndication sponsor captured most of the gains as long term gains (box 9a). So in some cases you can offset all gains, but it would appear not in all cases. 

Thanks again @Lane Kawaoka, @Greg O'Brien, @Ashish Acharya.  I went through my draft return for 2021 (well over 100 pages).  My accountant did include form 8582 and other relevant forms.  I was able to determine that box 10 gains were included, but box 9a gains were not.  Form 8582 Part I, line 2a (from Part V) is not including the 9a amounts as net income, so as a result that amount is not being included in determining the amount of losses allowed to apply.  I've read in some other threads that 9a cannot be offset by other passive losses as it is not considered passive.  That would be unfortunate as the 9a amounts are very large.  Just double checking with this group in case you think there is anything else I might be missing?

Thanks again,

Peter

Hi @Nicholas Aiola, I am reviewing my draft tax return and I am seeing some items not being included to offset from PALs.  On form 8582, Part V, the net income is listed (a), which ultimately drives how much passive loss will be allowed.  I see the un-recaptured section 1250 gains being included, but box 9a, Net long-term capital gain (loss), is not being included, and as a result passive losses are not being included to cover those amounts.  My accountants forms have it this way, and I tried it myself with Tax Free USA and I get the same thing.  Am I missing something here?  Should those amounts be included or are those exit gains not eligible to offset with other losses (which would be really unfortunate.). Thanks again for your help,

Peter

Thanks again everyone for the really helpful responses.  I'm going through my draft return from my accountant for 2021 to try and understand the numbers more specifically and this info is very helpful.  And I do see that my accountant included a list of all carryover losses for next year with the 'disallowing form'.  Many say 8582, some say 8582AMT, and a few are 1116 or 1116AMT (looks like they are related to foreign sources), NJ-BUS-2 (NJ forms), and there is one line item for 8995.  I'll dig into all of thus, thanks again for your help.

Thank you @Nicholas Aiola, really appreciate it!

Hi @Nicholas Aiola, really nice of you to answer all of these questions.  I posted a question in this topic and a couple of people were nice enough to respond, but trying to confirm one more thing, appreciate if you could take a stab at it.

I hold multiple passive real estate syndication investments and trying to confirm exactly how the rules work with suspended losses.  Here is a simple example just to illustrate:

- Invest in Syndication 1 in Year 1 for $100,000, realize $60,000 depreciation

- Invest in Syndication 2 in Year 2 for $100,000, realize $50,000 depreciation

There are typically distributions that would use up some of the depreciation losses, but ignoring them here for simplicity (I have many deals that have created a lot of losses).

- Syndication 1 exits in Year 3 for $150,000. There is a gain of $50,000 and depreciation recapture of $60,000.

From year 1 and 2 there is a total of $110,000 is suspended losses. Would that $110, be able to offset the $50,000 gain (taxed at cap gain rates), and the $60,000 taxed at 25% recapture rate?

Others have clarified that the losses from prior years can be used to offset both the gain (line 9a on K-1) and the recaptured depreciation (line 9c on K-1) from the exit.  I'm just trying to understand exactly how that works as I've read suspended losses can't be applied to gains and recaptured depreciation at sale time, except where the following is true:

1. Disposition of an entire interest (or substantially all)

2. In a fully taxable event (where all gain/loss is realized and recognized).

3. To an unrelated party.

Does the sale of the one syndication qualify for #1 and #2, thereby freeing up suspended losses from all other syndication investments to apply here?

Thanks in advance!

Peter

@Ashish Acharya, sorry, one follow up question.  The reason I started this thread is that people tell me, and I read that passive losses can't offset gains and recaptured depreciation, unless the following conditions are met:

1. Disposition of an entire interest (or substantially all)

2. In a fully taxable event (where all gain/loss is realized and recognized).

3. To an unrelated party.

I assume that the sale of one syndication deal meets the requirements of #1 and allows suspended losses from all syndication deals to be used?  Just trying to understand the logic behind how this is allowed.

Thanks again,

Peter

Thanks @Ashish Acharya, I thought if it was in box 9a I wouldn't be able to offset it with suspended passive losses, good to hear I still can.  I'm going to dig into the details with my accountant to make sure I fully understand it and we got it right (my accountant is not an expert on this but seems to work it out).  Wanted to get some other opinions before I started digging in.

 Thanks Duke, appreciate the response. That was my understanding, definitely conflicting info out there. 

I have a handful of deals that exited last year from the same sponsor. I’m surprised to see most of the gain is showing in box 9a on the K-1, is that typical or is the gain usually in box 10 and the recaptured depreciation in box 9c?

Thanks for all the great info on this forum.  I found a few posts similar to what I'm looking for but couldn't find the exact answer so creating this post, apologies if it is fully answered somewhere.

Trying to understand the specific treatment of suspended losses against syndication capital gains and depreciation recapture.  As an example:

- Invest in Syndication 1 in Year 1 for $100,000, realize $60,000 depreciation

- Invest in Syndication 2 in Year 2 for $100,000, realize $50,000 depreciation

There are typically distributions that would use up some of the depreciation losses, but ignoring them here for simplicity (I have many deals that have created a lot of losses).

- Syndication 1 exits in Year 3 for $150,000.  There is a gain of $50,000 and depreciation recapture of $60,000.

From year 1 and 2 there is a total of $110,000 is suspended losses.  Would that $110, be able to offset the $50,000 gain (taxed at cap gain rates), and the $60,000 taxed at 25% recapture rate?

I have read many places where people mention the losses need to be generated in the same year as the sale in order to offset the sell, but in other cases they imply that prior year losses can offset both gains and recapture?

Thanks,

Peter