Sale of home with OIH

[Bill Tubbs]

Taxpayer's adjusted basis in home is $130,000 after taking into account depreciation for Office In Home (Form 8829). Home sold in 2009 for $115,000 -- so, a loss of $15,000. House was used 12% for business, so can a loss of $1800 ($15,000 * 12%) be reported on F4797? Pub 523 talks about perhaps not having to report the gain on a sale of a home, but doesn't address a loss like this. Business use of the home was a home based, office-type of business -- a large family room was used for business.

(numbers rounded for ease of referencing)

Thanks,
Bill

[solomon]

This sale does not go on a 4797 - that would happen only if the office was a detached structure from the residence. If the 2 out of 5 was met, then any gain is excluded with the exception of the unrecaptured 1250 gain. The loss is personal and not deductible.

[DTS]

Bill

Page 14 might be helpful.

http://www.irs.gov/pub/irs-pdf/p587.pdf

[Bill Tubbs]

the pubs

The pubs talk about excluding the gain on a sale of an office-in-home, but I haven't seen any discussion in them about whether the loss is deductible or not. Another colleague I talked with today says when he researched this, the office-in-home is Sec 1231 and the loss would be deductible on F4797. His research seemed sound. Another post I found tonight, while not exactly on point (it was focused more on the Sec 121 exclusion), was http://www.taxalmanac.org/index.php/..._121_exclusion

[Burke]

If OIH is 1231 property, it kinda makes sense that a loss would be deductible. However, it does not make sense that Congress would concede in excluding a gain on OIH under the law, and then also allow a loss. Of course, they did not intend to exclude depr in prior law either, which is why they rectified it on 5/12/87.

[Kram BergGold]

4797

The sale of a home office only goes on Form 4797 if the office is in a building not connected to the home. If the office is withing the 4 walls of the building the sale does not go on Form 4797.