Rental, how to handle

[Kram BergGold]

My client was renting a condo at FMV to his mother for many years. We reported all rent and deductions. The mom died in June 2008. After her death the condo was not rented and was only used by my client when there trying to sell the condo. On the one hand there was no personal use so I think maybe we continue to take deductions but on the other hand the condo was not available for rent so I think deductions are not allowed. So on the 2008 return do I treat it as a rental property for 6 months, or a 12 month rental with no rent after June?

[WhiteOleander]

I think this sort of situation goes by the intent of the taxpayer. After the mother died, did he intend to rent the property again? If he intended to rent it but did not because repairs etc were being made, I would contiune to take deductions for the entire year.

But, if the t/p did not intend to rent the property again, then I would stop all deductions after June.

[BOB W]

My client was renting a condo at FMV to his mother for many years. We reported all rent and deductions. The mom died in June 2008. After her death the condo was not rented and was only used by my client when there trying to sell the condo. On the one hand there was no personal use so I think maybe we continue to take deductions but on the other hand the condo was not available for rent so I think deductions are not allowed. So on the 2008 return do I treat it as a rental property for 6 months, or a 12 month rental with no rent after June?

It can take several months after a tenant dies to make the rental ready for rent, or in your case, sale. If a sales does not happen in several months will they consider renting it again?

[Kram BergGold]

No intent to rent again

It is now Aug 2009. The condo has not been rented for over a year. I don't believe it will ever be rented again. So I guess I will only claim rental deductions through June and then real esate taxes on Scheudule A after that.

[JON]

Is it held for sale?

Capitalize the carrying cost while holding for sale...........

[Bees Knees]

Assuming your client did not use the condo for personal purposes after his mother’s death, and his intent is to sell the condo, I would convert it from rental to investment property. Thus, all expenses after the date he takes it off the rental market become Schedule A investment expenses, subject to the 2% AGI limitation.

[Kram BergGold]

Thanks Bees

Something was nagging at me about this situation that I was missing. Bees you nailed it right on the head.