Ask Tom Anything - April 28, 2023

Transfers that do not release passive losses plus your questions answered

In last month’s Ask Tom Anything, there was a question about what types of transactions do and do not release an activity’s suspended passive losses.

The disposal of a passive activity allows the release of any suspended passive losses from that activity; however, §469(g)(1)(A) requires that “all gain or loss realized on such disposition is recognized” to release the losses. What happens when this does not occur?