My client is a family owned, domestic partnership with Canadian partners that sold a condominium they have owned and rented in Hawaii for many years.
The gain I understand is Effectively Connected Income, the gain is $199,000. A little over $52,000 was withheld in escrow for taxes and all four members have been issued an 8288-A for their percentage of the wittholding under the rules for FIRPTA
. There is a nonpassive loss of $167,000. Do I have to report the gain as "unrecaptured 1250 gain" on form 8804? Doing so assesses taxes on the total gain, and wants to apply the withheld amount then allows a refund of a little over $3,000, and the loss is completely lost. If I can carry it over to the 1040-NR, there is no tax and each partner receives a refund of their withheld amount, which is what we were expecting.