Quote:
Originally Posted by JonathanLB
Yup, I was a bit confused about this too when I saw on my return a massive "disallowed loss" but since I'm not in the real estate business myself, that disallowed loss can only be applied against future passive income not against regular income or business income from other sources, unless the source of the disallowed loss is sold, then it becomes transferrable against any other income. That was the explanation from my accountant, at least.
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I think you’re referring to the passive activity loss limitation rules. The other post was focused on capital loss rules.
Passive activity losses are usually, although not always, ordinary losses that can only be used to the extent you have passive activity income (whether that income is ordinary or capital).
Capital losses can only be used against capital gains (plus $3k per year).
They can interact with one another. If you had a $10k passive activity ordinary loss and a $15k passive activity capital gain along with a $15k capital loss not from a passive activity, you could use the $10k loss because you have passive activity income and also use the capital loss against the capital gain.
The end result would be a $10k ordinary loss you could use against other ordinary income.
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