Residence purchased for adult child

[Penelope]

Does this qualify as the taxpayer's 2nd home and can he take the usual itemized deductions, even if he does not live in the home himself?

The home is not an investment, but the taxpayer might need to sell it. Assuming he has never lived in it, does the sale result in a capital gain, under the sale of residence rules, or other rules....?

Thanks for any help.

[erchess]

I believe

that this home if sold will be a Sch D Capital Gain (if sold at a gain) or a reported but not deductible personal loss (if sold at a loss). Since the taxpayer has not used the home as his main home ever there is no way to exclude any part of the gain.

If the home is not his main home or his second home then no he cannot deduct the Mortgage Interest and Taxes on Sch A. However, assuming that the two homes you know about are the only two homes he has, it would not be difficult for him to claim the home as a vacation home. I would be caught treating it as his second home if he owns no third home or his other home or homes each have lower total interest and taxes. I know of no requirement in the code that his second home can't be permanently occupied by someone else or that he visit it during the taxable year. There may be a requirement that it have a bed that goes unused when he is not using it and of course it has to have cooking and sanitary facilities.

This is the part I am least sure of but I BELIEVE that the Mortgage Interest and Taxes become part of his basis in the house if they cannot be deducted.

I am not where I can conveniently look up anything so perhaps someone who knows more than I do will post contrary opinions and back them up with citations.

[Kram BergGold]

Many assumptions

First I assume the house it titled in the parents name only. Then I assume the parent has made all payments of taxes and interest and that the adult child did not pay rent. If this is true I would deduct the interest and taxes on the parent's return. If the hosue is sold at a gain the parent reports the sale and the gain as a capital gain and pays the taxes.

[erchess]

Kram

I believe that you are also assuming that the taxpayer has no other "second home".

[BP.]

If the home is not his main home or his second home then no he cannot deduct the . . . Taxes on Sch A.

Deduction for RE taxes isn't limited by number of homes.