Home to rental then sold 5 months later .. loss?

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  • LCP
    Senior Member
    • Dec 2005
    • 432

    #1

    Home to rental then sold 5 months later .. loss?

    The market is down so I'm using the selling price of the home for depreciation. Closing costs create a loss even from that value and even after depreciation.

    Can they take the loss?
  • BOB W
    Senior Member
    • Jun 2005
    • 4061

    #2
    Originally posted by LCP
    The market is down so I'm using the selling price of the home for depreciation. Closing costs create a loss even from that value and even after depreciation.

    Can they take the loss?


    Something in the back of my mind says it needs to be a year or more as rental property to take a loss upon sale. "Just thinking out loud".
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

    Comment

    • Gretel
      Senior Member
      • Jun 2005
      • 4008

      #3
      Originally posted by LCP
      The market is down so I'm using the selling price of the home for depreciation. Closing costs create a loss even from that value and even after depreciation.

      Can they take the loss?
      I don't know about the loss but wondering if the 5 month depreciation was over year end and how much of this depreciation is allowable depreciation.

      Comment

      • Burke
        Senior Member
        • Jan 2008
        • 7068

        #4
        Originally posted by BOB W
        Something in the back of my mind says it needs to be a year or more as rental property to take a loss upon sale. "Just thinking out loud".
        You don't take depreciation at all if it is placed in service and the property is disposed of in the same year. TTB 9-11. Is this what happened? It sounds like it was only rented temporarily because it could not sell, so I would not treat it as rental.

        Comment

        • taxmom34
          Senior Member
          • Nov 2008
          • 732

          #5
          if it was only used as a rental for 5 months i would just reduce the basis by the depreciation taken. there was something a couple years ago that a personal residence could be used as rental pending selling, but i think it was more like two years, and still be considered sale of personal residence.

          Comment

          • Maribeth
            Senior Member
            • Oct 2006
            • 425

            #6
            Originally posted by LCP
            The market is down so I'm using the selling price of the home for depreciation. Closing costs create a loss even from that value and even after depreciation.

            Can they take the loss?
            No, they cannot take the loss. You indicate that the property was their personal residence. They have an economic loss, but not a tax loss.

            The 5 months of rental income incidental to selling the property does not change the character of the property.

            Maribeth

            Comment

            • LCP
              Senior Member
              • Dec 2005
              • 432

              #7
              Originally posted by Burke
              You don't take depreciation at all if it is placed in service and the property is disposed of in the same year. TTB 9-11. Is this what happened? It sounds like it was only rented temporarily because it could not sell, so I would not treat it as rental.
              I knew that was the rule for personal property but not for real. My software handles the former that way but not the latter.

              I'll have to see when the rental began..... they are a new client and the period I'm dealing with is Jan thru May....... it's likely they had it ready and available to rent in December of 2009.

              So.......................... there has to be a more specific guideline for when a personal residence becomes a full fledged rental property........ hmmmm.

              Comment

              • MRPLOW
                Senior Member
                • Apr 2009
                • 118

                #8
                I had this same issue with a rental property of less than 2 years.
                Never could find a definite answer.

                Comment

                • oceanlovin'ea
                  Senior Member
                  • Jun 2005
                  • 2682

                  #9
                  different circumstances

                  What if couple have another home in another state, Tennessee for example. They have had plans to move there for several years. Now they are moving...vehicles are already registered in Tennessee.
                  Because of low property values, they decide to rent the house instead of selling it now. They will sell it when conditions are more favorable. So it will become rental property.
                  Not just rented till it sells. Just rental for now. If the market is better in 1 year and they sell it , would it be considered rental property. Is there a time frame involved here?

                  Linda EA

                  Comment

                  • LCP
                    Senior Member
                    • Dec 2005
                    • 432

                    #10
                    Well...... I'm going to take the loss.

                    Comment

                    • New York Enrolled Agent
                      Senior Member
                      • Nov 2006
                      • 1531

                      #11
                      Originally posted by LCP
                      Well...... I'm going to take the loss.
                      I find it interesting that you ask your original question and IMO Maribeth gives you the perfect answer. Yet you ignore her comment and the comments of others who basically concur. Out of curiosity, why did you ask in the first place?

                      One more thing - make sure you read §6694(a).

                      Comment

                      • taxmom34
                        Senior Member
                        • Nov 2008
                        • 732

                        #12
                        i agree with new york enrolled agent, and you peaked my curiosity too. why pose the question?

                        Comment

                        • LCP
                          Senior Member
                          • Dec 2005
                          • 432

                          #13
                          Originally posted by New York Enrolled Agent
                          I find it interesting that you ask your original question and IMO Maribeth gives you the perfect answer. Yet you ignore her comment and the comments of others who basically concur. Out of curiosity, why did you ask in the first place?

                          One more thing - make sure you read §6694(a).
                          The perfect answer would have indicated how many months of renting makes it a rental...... or that a personal residense can never be a rental.

                          ....or it might have refered to 6694, which I will go read.

                          Comment

                          • ChEAr$
                            Senior Member
                            • Dec 2005
                            • 3872

                            #14
                            Here is the IRS answer:

                            It depends on facts and circumstances.
                            ChEAr$,
                            Harlan Lunsford, EA n LA

                            Comment

                            • LCP
                              Senior Member
                              • Dec 2005
                              • 432

                              #15
                              Originally posted by LCP
                              The perfect answer would have indicated how many months of renting makes it a rental...... or that a personal residense can never be a rental.

                              ....or it might have refered to 6694, which I will go read.
                              You fooled me..... I thought you had referenced a pertinent code section. I guess I don't worry too much about unreasonable positions or I'd have that one memorized.

                              Comment

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