Passive Losses Offsetting Pasive Gains?

[Daniel Dietz]

Hello All,

There is lots of talk on here about Passive Losses and if there are deductible or not and if so, to what amounts.

To my understanding, if you are NOT a 'Real Estate Professional' (which I am, but have never had more than the 25K limit in losses to worry about using it) you are limited to offsetting "passive losses' with 'passive gains'. There is an exception if your income is less than 100K you can write off up to 25K of passive losses.

What I am looking for is clarification on how those passive losses and passive gains 'offset each other' BEFORE they go to your personal tax return.

What I mean is this; let's assume I have a few rentals that I bought recently with modest down payments and maybe even did a Cost Segregation Study on one so with depreciation figured in those are going to give me a passive loss of 50K. Now lets ALSO assume that I have a few more that I bought a while ago with large down payments or cash so with low/no interest to deduct THIS set of properties show a passive GAIN of 30K.

So now the question is; Do I only get to us 25K of that 50K loss, or do the properties 'offset' BEFORE going over to personal tax return - meaning 50K loss + 30K gain = 20K loss? Hope that makes sense :-)

Thanks, Dan Dietz