Disposition of rental residential real estate section 1231 Loss - Spidell

Disposition of rental residential real estate section 1231 Loss

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Message Board Disposition of rental residential real estate section 1231 Loss

  • This topic has 2 replies, 3 voices, and was last updated 8 months ago by Belinda Cespedes.
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    • #191548
      Anonymous
      Member

      I have a large Sec 1231 loss from the sale of a residential rental property.  The loss flows from the 4797, to the Form 461.  This client also has a large Ordinary Loss from his S-Corp.  On the form 461, the 1231 loss is backed out in Part II, line 11,  of the excess business loss calculation, I would have thought since the client is active in the rental, it would be part of the excess business loss, and carried forward.  Instead, I am able to realize the entire loss, due to total disposition, against the other taxable income.  Client is not a real estate professional.  Am I missing anything?  I reviewed the spidell handbook, but don’t see any guidance on this.

      Thank you, Belinda

    • #191625
      Larry Pon
      Participant

      If your client has a large loss, it may be a great opportunity to do a Roth conversion at no or little tax cost.  Run some projections to see much of a Roth conversion keeps him in the 12% tax bracket.

    • #191897
      Belinda Cespedes
      Participant

      That is exactly what I am doing, but I was surprised that the rental real estate loss was not limited to the access business loss rules.  I don’t want to over shoot the Roth conversion.  Any thoughts?

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