Previous Year Passive Losses

[cmbtax]

Taxpayer had received K-1's for a rental property held in a family trust, for several years.  Each year created a passive loss carryover on the TP's 1040.  In 2022, the last member of the Family Trust passed away and the Trust ended.  It distributed the rental property to the last beneficiary (my client) based on the terms of the Trust.  The K-1 is marked Final.  So, all of the previous PLC on the TP's 8582 is being released.

I am concerned because the property was not sold, it was transferred to my client.  Should this PLC be fully released?  If no, how do I keep it from releasing?

[sjrcpa · Accepted solution]

No the loss should not be released.

[cmbtax]

Thank you.  That was my gut feeling.  Do you know how in Lacerte I would prevent it from releasing?  I am thinking do not mark K-1 final in Lacerte.

[sjrcpa]

That sounds like a good idea.