Residential Rental

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  • TAX
    Senior Member
    • Dec 2005
    • 330

    #1

    Residential Rental

    Client, an individual, move to a new house in Sep 2010. Starting Oct 1st, he was able to rent his old house (Old Primary residence).

    What cost should be used for depreciation purposes?

    (A) Original cost of house purchased (House was purchased in 2008)

    (B) Market value as of Oct 1st?
  • S T
    Senior Member
    • Jun 2005
    • 5053

    #2
    Basis on Residence to Rental

    The basis for depreciation is either the cost plus improvements or the FMV whichever is lower. (less the land value) on the date of change.

    Pub 551 - Page 10 has an example

    Also, note the subsequent Sale Calculation

    Sandy

    Comment

    • TAX
      Senior Member
      • Dec 2005
      • 330

      #3
      Originally posted by S T
      The basis for depreciation is either the cost plus improvements or the FMV whichever is lower. (less the land value) on the date of change.

      Pub 551 - Page 10 has an example

      Also, note the subsequent Sale Calculation

      Sandy
      Thank you. It helped a lot. One question: I looked at "Sales Calculation" Why do you need to use formula for gain and loss (Both)? Do you use both basis and then see which one applies when you sale?

      Comment

      • Kram BergGold
        Senior Member
        • Jun 2006
        • 2112

        #4
        answer

        If the property has declined in value at the start of the rental period from the origianl cost plus improvements then you use cost to figure gain and fair market value to figure loss.
        Usually this results in no gain when you figre fo rgain and no loss when you figure for loss so it is a wash on Schedule D.

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