Mr. Gray recognized a $60,000 loss on sale of his entire interest in a passive activity. He had a $52,000 ordinary passive activity loss carryforward from prior years. Mr. Gray can deduct the $52,000 ordinary passive activity loss in the year of sale.

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According to IRS regulations, any unused passive activity losses can be deducted in the year in which the entire interest in the activity is sold. Therefore, Mr. Gray can deduct his $52,000 ordinary passive activity loss carryforward in the year of sale.

Mr Gray Recognized a $60,000 Loss on Sale of His