Rent for a yr, sell at a loss

[Possi]

My new client purchased a condo for 350k.(in CA)
He lived in it 2 1/2 years.
Got stationed here in Jan 09.
Rented it from mid Jan. to end of year.
House is in escrow with selling value of 300k. (The gov't is taking the loss. ??)

I'll depreciate it for a year, he'll get a sweet 21k write-off with all the expenses and depreciation.
...and the dep'n recapture will be absorbed with the loss next year....

This just sounds too good to be true......

[Gretel]

I don't see anything wrong with the picture. Good timing.

[BOB W]

My new client purchased a condo for 350k.(in CA)
He lived in it 2 1/2 years.
Got stationed here in Jan 09.
Rented it from mid Jan. to end of year.
House is in escrow with selling value of 300k. (The gov't is taking the loss. ??)

I'll depreciate it for a year, he'll get a sweet 21k write-off with all the expenses and depreciation.
...and the dep'n recapture will be absorbed with the loss next year....

This just sounds too good to be true......

It is done all the time, but I still worry each time.

[Possi]

Sweet!

A great deal for my client. And we eat another one in taxes we pay... Oh well, I'll shake it off with the rest of the country!
Only in America~

[New York Enrolled Agent]

My new client purchased a condo for 350k.(in CA)
He lived in it 2 1/2 years.
Got stationed here in Jan 09.
Rented it from mid Jan. to end of year.
House is in escrow with selling value of 300k. (The gov't is taking the loss. ??)

I'll depreciate it for a year, he'll get a sweet 21k write-off with all the expenses and depreciation.
...and the dep'n recapture will be absorbed with the loss next year....

This just sounds too good to be true......

Contray to the other posts in this thread, I think it IS too good to be true.

When you convert a personal residence to a rental property, your basis for loss is the LOWER of the adjusted basis of the property or the FMV at the time of the conversion. Presumably, your client bought near the height of the market ($350K) and in January, 2009, the FMV of the property was close to the $300K sale price. Thus when he sells it, there may be no loss at all.

[Possi]

FMV last year?

Contray to the other posts in this thread, I think it IS too good to be true.

When you convert a personal residence to a rental property, your basis for loss is the LOWER of the adjusted basis of the property or the FMV at the time of the conversion. Presumably, your client bought near the height of the market ($350K) and in January, 2009, the FMV of the property was close to the $300K sale price. Thus when he sells it, there may be no loss at all.

So I need to know the FMV last January? I don't know how in the world I would do that, and I don't think my client will be motivated to find that, either.

Man, this is not a good night... 2 brick walls in 1 night.

[Gretel]

Sorry, Possi. After NY EA posted I also remembered that depreciation basis for a converted asset (Personal to biz) is the lower of Cost or FMV.

[Possi]

thanks

... for all the help!