sale of residence with OIH

[oceanlovin'ea]

Client sold their home in Florida in December 2008. He used a room in the house as a studio to practice his music. I have read the posts that said the depreciation claimed has to be reported as income.

But it just occurred to me that they might not have sold their house for a gain. Owned home for a long time and made many improvements to house.

If they did not have a gain on the sale, is the depreciation claimed still have to be reported as a gain.

If I have to report it, how do I do that?

Sorry for asking probably stupid questions. My mind and body are in pain. I can't even think of my name. I really need to see and hear my ocean.

Linda (i think)

[BHoffman]

Client sold their home in Florida in December 2008. He used a room in the house as a studio to practice his music. I have read the posts that said the depreciation claimed has to be reported as income.

But it just occurred to me that they might not have sold their house for a gain. Owned home for a long time and made many improvements to house.

If they did not have a gain on the sale, is the depreciation claimed still have to be reported as a gain.

If I have to report it, how do I do that?

Sorry for asking probably stupid questions. My mind and body are in pain. I can't even think of my name. I really need to see and hear my ocean.

Linda (i think)

Hi Linda - no gain no pain No recapture on a loss.

I need to see and hear your ocean too. And sit on its shore. And be served fancy umbrella drinks by .... oh never mind..... there I go again.....more coffee....must.....keep......going......

[Snaggletooth]

Cite

I rarely second-guess you Ms Hoffman because you're nearly always right.

But I'm going to ask for back-up on this one. It would appear that if 10% of the house is business, then the mechanics of the 4797 would work, claiming 10% of the selling price, 10% of the cost, recapturing depreciation under s. 1250. And then if there is STILL a loss, it can't be taken. If there is a profit, it is exempt also, except to the extent of the depreciation recapture...

[BHoffman]

I don't have time to find the cite. Here's a link to a discussion on another forum.

http://www.taxalmanac.org/index.php/Discussion:Recapture_of_depreciation_for_office_use_of_home

Riley2 answers that there is no recapture when the home sells for a loss. The guy is brilliant and I'd take his word as gospel anytime.

[oceanlovin'ea]

sold for loss

Ok. Just talked to client and they did sell the house for a loss.

She said they had it 20 years and it was a 3600 square foot money pit.

So I don't have to do anything. Is that correct?

Linda

[Davc]

I rarely second-guess you Ms Hoffman because you're nearly always right.

But I'm going to ask for back-up on this one. It would appear that if 10% of the house is business, then the mechanics of the 4797 would work, claiming 10% of the selling price, 10% of the cost, recapturing depreciation under s. 1250. And then if there is STILL a loss, it can't be taken. If there is a profit, it is exempt also, except to the extent of the depreciation recapture...

That's using the old rules. Also, Unrecaptured 1250 gain is not recaptured, hence the name, it is recognized.