Suspended losses (last resort to lower ordinary income without REP)​

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The order in which suspended losses are deducted is:

1. To first offset depreciation recapture and gain from the activity that was sold.
2. If the suspended losses are in excess of the total gain, the remaining suspended losses will then offset ordinary income.
3. If the suspended losses do not offset 100% of the gain from the activity that was sold, you may use suspended losses from other rental activities to offset the remainder of the gain from sale.

This is detailed in IRC Sec. 469(g)(1)(A). And if you want to have a wild Wednesday night, here’s an article that explains it in-depth:

https://www.thetaxadviser.com/issues/2008/may/disposingofanactivitytoreleasesuspendedpassivelosses.html

For more tax info check out our tax page.

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