Loss of Use / Loss of Rents: Normally, there is a 20% included limit.

Here's my situation:2024:- W2 income: ~ $1M (married filing jointly in CA) LLC profit: $80K (from 2 real estate flips, in NC on spouse's name)Capital loss carryover: $380K (from stocks in 2023)In what cases can my LLC profit be treated as capital gains? 

Are you certain you would have to sell at a loss?

So in the words of Clint Eastwood: "A man has to know his own limitations."

He said that he had never seen investor notes this poorly constructed to limit the rights of the investor. 

I've accepted that I will take a significant loss on this, and have already learned a ton from it, but I would like to reduce the total loss as much as possible.

However, the tax treatment differs between short-term and long-term rentals:Short-Term Rentals (STRs): If you materially participate (work 100+ hours and more than anyone else on the property), you may be able to offset rental deductions against W-2 or other active income, offering greater tax benefits.Long-Term Rentals (LTRs): If your AGI exceeds $100K, your rental losses may be limited, unless you qualify as a Real Estate Professional (REPS).If you plan to expand your rental portfolio, consider an LLC later for liability protection and easier management.

I have  a W2 job and look forward to the losses this year to offset some of my income (Not my 'WHY' for running an STR, but a nice bonus).

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

Any tax knowledge of if people doing this strategy are able to take the losses from the cost seg study (on the ADU) to offset their W2 income?