I had two rental properties, each of which had its own column on Schedule E. I purchased one in 2001 and one in 2007. The 2001 property has had minor Schedule E losses along the way, and has built up a small suspended passive loss on Form 8582. The 2007 property had built up a much larger passive loss along the way. In 2015 I converted the 2007 property to personal use and moved into it as my primary residence. The 2001 property continues to be used as a passive rental property.
If I sell the 2001 property now, I know I can use its own carried-over passive losses to offset the capital gains. But can I also use my suspended passive losses from the 2007 property to offset those gains?
My reading of the various IRS instructions seems to point to not being able to use the 2007 property's losses at all to offset the 2001 property's capital gains (or any other income from the 2001 property), since the 2007 property is no longer a passive income activity. I'm hoping that I'm misunderstanding, though, because I'd like to sell the 2001 property this year, but the tax consequences will be too ugly unless I can use the 2007 property's suspended losses to offset the gain.
