Does AMT erode value of suspended passive losses?

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Rolyatroba
Posts: 185
Joined: Mon Apr 22, 2013 1:14 pm

Does AMT erode value of suspended passive losses?

Post by Rolyatroba » Wed Apr 19, 2017 11:39 am

We did a 1031 exchange in 2016, where there was approx. $150k in prior passive losses. After the exchange, we are now booking taxable income on the new passive activities.

For regular taxes, I can see that passive income is offset by prior losses, and thus there is $0 on 1040 line 17. But, on AMT, I can see that I am taxed for the passive income (line 19).

This seems then, that I am losing the benefit of the prior losses, in that the prior years' loss will decrease every year to offset the current year's income, but I am paying taxes on this due to AMT. In 10 years time, all the prior losses will be gone, but I will have paid taxes on every dollar of it.

Do I have this right, or is something wrong on my taxes? I DIY my taxes, btw. Real numbers below for clarity.

Prior Passive Losses: $152,313

Schedule E Income: $0 ($13,983 passive income offset by prior losses)

AMT Line 19: $13,983

Additional AMT tax due to passive income: $4,544 (32.5% of passive income)

Prior Passive Losses for 2017 taxes: $138,330 (this amount goes down, even tho I pay taxes on it?).

Any help or thoughts would be appreciated.

kaneohe
Posts: 4261
Joined: Mon Sep 22, 2008 12:38 pm

Re: Does AMT erode value of suspended passive losses?

Post by kaneohe » Wed Apr 19, 2017 12:54 pm

19 Passive activities (difference between AMT and regular tax income or loss) .

Line 19 F6251 as shown above is not the passive income but the difference between AMT and regular income (for the passive activity).
Do you know that they are different for regular income and AMT? The instructions for line 19 show that they could be but that doesn't
mean they have to be .

Two Headed Mule
Posts: 289
Joined: Sat Mar 28, 2009 8:38 am
Location: Brooklyn, New York

Re: Does AMT erode value of suspended passive losses?

Post by Two Headed Mule » Wed Apr 19, 2017 1:53 pm

This strikes me as a pretty unusual result. It is essentially indicating that there is no passive loss carryover for AMT purposes, which would be unusual given that your activities are presumably rental real estate, which don't generally have much in the way of tax preference items. One would generally expect the carryovers for regular and AMT to be similar, if not identical.

The good news is that, even if the result is correct, you will be entitled to an AMT credit going forward equal to the additional AMT tax, so this is only a timing issue.

Mule

Rolyatroba
Posts: 185
Joined: Mon Apr 22, 2013 1:14 pm

Re: Does AMT erode value of suspended passive losses?

Post by Rolyatroba » Wed Apr 19, 2017 5:07 pm

Thanks...I'll check out to see if I've somehow missed carrying over passive losses to AMT as well.

hale2
Posts: 68
Joined: Sat Feb 15, 2014 5:54 pm

Re: Does AMT erode value of suspended passive losses?

Post by hale2 » Thu Apr 20, 2017 12:09 pm

I don't know which software you are using but I had the same issue with turbotax. If you go through the interview you will see that is has a spot for carryover losses for both the regular tax and the AMT. It defaulted to zero for the AMT slot so I had to enter that number. Once I did that the problem corrected itself.

Rolyatroba
Posts: 185
Joined: Mon Apr 22, 2013 1:14 pm

Re: Does AMT erode value of suspended passive losses?

Post by Rolyatroba » Thu Apr 20, 2017 12:22 pm

hale2 wrote:I don't know which software you are using but I had the same issue with turbotax. If you go through the interview you will see that is has a spot for carryover losses for both the regular tax and the AMT. It defaulted to zero for the AMT slot so I had to enter that number. Once I did that the problem corrected itself.


That was exactly my problem as well! I saw a default zero there and just left it as is; changing from zero to the same as "Regular Tax" fixed this.

Thanks for corroborating.

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