Passive activity loss is reported as nonpassive loss
Scenario
A passive loss is reported as a nonpassive loss.
Cause
According to the IRS Form 8582 Instructions:
If you disposed of your entire interest in a passive activity or a former passive activity to an unrelated person in a fully taxable transaction during the tax year, your losses allocable to the activity for the year are not limited by the PAL rules. A fully taxable transaction is a transaction in which you recognize all realized gain or loss.
When a passive activity is disposed entirely in UltraTax CS, you can deduct all prior year and current year passive losses. If you dispose of a passive activity on an installment basis, this will divide the current-year gain recognized by the unrecognized gain at the beginning of the tax year to generate a ratio. The passive losses are multiplied by this ratio to generate the current year-allowed loss.
