Teresa bought a condo in 2013, which she converted to a rental property in 2014. She decided to convert it back to her personal residence in May, 2017 and sold it in November, 2020. At the time of the conversion back to her principal residence, she had a passive loss carrryover of $10,105. What happens to this passive loss?

The passive loss is deducted against ordinary income in the year of conversion back to a principal residence.

The passive loss is carried forward until the sale of her personal residence in 2020, and is then deducted.

The passive loss carryforward is lost.

The passive loss carryover continues indefinitely until it can be deducted from passive income.