1.26 Ark. Code R. 51-436(2)
If all gain or loss realized on the disposition of an entire interest in a passive activity is recognized, then the excess of:
Any loss from the activity for the tax year of disposition (including losses carried over from earlier years)
OVER
Any net income or gain for the tax year from all other passive activities (including losses carried over from earlier years)
is treated as a loss that is not from a passive activity. IRC Sec. 469(g)(1)(A). As such, any gain from disposing of a passive activity would offset any loss from the activity for the tax year of the disposition. The balance of the loss would then be applied first against any net income or gain from other passive activities, and finally against nonpassive income.
1.26 Ark. Code R. 51-436(2)