The National Directory of Certified Public Accountants

Ask A CPA - Capital Gains & Losses

Prior Year Suspended Losses - Installment Method

When you sell your passive activity interest at a gain, (using the installment sale method), the prior year suspended losses are not allowed in full. You are allowed a prorated amount. They are only allowed in the same ratio as the gain recognized each year bears to the gain remaining to be recognized as of the start of the year. Speak to your local CPA about your passive loss deductibility.

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