Reply to Is renting a place out worth it considering the Depreciation Recapture Tax?

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[quote=Anonymous][quote=Anonymous]
Thanks for the link. I would like to hear your interpretation of  Pub 925 quote: [quote]Dispositions
Any passive activity losses (but not credits) that have not been allowed (including current year losses) generally are allowed in full in the tax year you dispose of your entire interest in the passive (or former passive) activity. However, for the losses to be allowed, you must dispose of your entire interest in the activity in a transaction
in which all realized gain or loss is recognized. Also, the person acquiring the interest from you must not be related to you [\quote] 
http://www.irs.gov/pub/irs-pdf/p925.pdf
[/quote]
It sounds like passive losses can be accrued and used to offset a gain in the year you sell your passive activity property in an arms-length transaction. It agrees with [url]http://www.irs.gov/taxtopics/tc425.html[/url], which says that
[quote]Generally,[b] you may deduct in full any previously disallowed passive activity loss in the year you dispose of your entire interest in the activity.[/b] In contrast, you may not claim unused passive activity credits upon disposition of your entire interest in the activity. However, you may elect to increase the basis of the credit property in an amount equal to the portion of the unused credit that previously reduced the basis of the credit property.[/quote]
No clue what "passive activity credit" is though. [/quote]

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