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

[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?

[BOB W]

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".

[Gretel]

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.

[Burke]

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.

[taxmom34]

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.

[Maribeth]

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

[LCP]

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.

[MRPLOW]

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

[oceanlovin'ea]

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

[LCP]

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

[New York Enrolled Agent]

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).

[taxmom34]

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

[LCP]

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.

[ChEAr$]

Here is the IRS answer:

It depends on facts and circumstances.

[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.