Home/Rental?

[Possi]

The facts are simple... the sale is not...

Oct 2005 Purchased and moved in. (military)
July 2007 Moved out, stationed elsewhere
VACANT for one year
July 2008 Rented
July 2009 Still Rented
July 31, 2010 Renters move out
House taken off the market for rent, and put ON the market for sale.
December 6 Sold at a loss, a sizeable loss

I have read the discussion recently, and I do not think they qualify to take the loss. I believe the INTENTION when it was vacant, was to sell it.. (I have left a message to be perfectly clear on the intention)

Is anyone following me on this? If there was a GAIN on it, I would seek to exclude it (for the military move) as personal home. So it would follow that the loss would be personal and not deductible.

Any seconds? Would you like to phone a friend? No thanks, I'll poll the audience.....

[Rae]

Rental property

I would say it was rental property. It should have been depreciated while being rented out and that will have to be recaptured.

[FEDUKE404]

Personal converted to business

I tend to agree with Rae, primarily due to the fact it has (apparently) been a long period since the TP actually used the home as a personal residence.

Depreciation is likely (required!) from July 2008 through July 2010.

Now things could have gotten interesting if the person had moved back into the home.....

FE

[Possi]

Others?

sale price 83,990
+ dep'n 20,998
-cost (198,000)
________________


loss on 4797 $93,012


really?

I'm listening, and I hear ya' ~~ and I'm waiting for more to chime in...

Thanks so far!

[AJsTax]

I tend to agree

that it is personal use since you could claim exclusion on 2 of last five years if considered had to move for military and the open time before renting as part of the use time.
There is no recapture without a gain.

[S T]

Aren't there Spec Rules on Conversion

special Rules

Losses in Conversion of Personal Residence Into Rental Property

One inference could be if you convert your home into a rental property, upon sale you can take losses even if the losses are less than your tax basis in the property. However, this inference is inaccurate. There is a special tax-basis rule that prevents such tax-payer friendly rule.

Rule for Losses Upon Conversion from Personal Residence Into Rental Property
The rule says that if you convert your home into rental property and sell it your tax basis for calculating losses in a sale is the lesser of:

1.The property's tax basis on the conversion date under the normal rules. This means your tax basis is whatever you had bought the property PLUS the cost of improvements until the time of conversion. For example, if you had bought your home for $300,000 and the cost of improvements until the conversion was $50,000. Your tax basis would be $350,000, upon the sale of the newly converted rental property for tax loss purposes. OR,
2.The property's Fair Market Value on the conversion date. That is why it is so important to ask a local realtor upon conversion to provide you with some record to keep as to how much an able buyer is willing to pay for the property.
This is important to note the IRS by this special basis rule aims to prevent any decline in value that occurs before the conversion date. However, a post-conversion decline in value results in tax loss to the extent such losses are not offset by depreciation deductions.

Tax Basis for Gains Are Different In a Conversion
Let's say you sell your newly converted rental property at a profit. What tax basis would you use?

The answer is you would use the usual tax basis rule. This means your basis for gains purposes would be your purchase price PLUS the cost of any improvements MINUS any depreciation deductions.

Depreciation deductions are allocable to the building not the land over 27.5 years.

Here is a link with some examples http://real-estate.lawyers.com/blogs...-Property.html

Does your cost include the Land, Bldg and Improvements? It seems the $ 198,000 either includes land value, or you have not calculated land value into the cost. $ 198,000 depreciation for 2008, 2009 and 2010 , it seems the depreciation of $20K is too high based on $ 198,000, MACRS 27.5

Sandy

[Gretel]

I vaguely remember something about special rules for military so they can claim Sec. 121 were others can't.

[taxmom34]

agree with Gretel. i recall some exception relating to military

[Possi]

Fmv

special Rules




Here is a link with some examples http://real-estate.lawyers.com/blogs...-Property.html

Does your cost include the Land, Bldg and Improvements? It seems the $ 198,000 either includes land value, or you have not calculated land value into the cost. $ 198,000 depreciation for 2008, 2009 and 2010 , it seems the depreciation of $20K is too high based on $ 198,000, MACRS 27.5

Sandy

I'll see if I can get the FMV at conversion. I think that is the right treatment. However I am still torn on the "if there was a gain, it would qualify for the exclusion" and so it follows that if there was a loss it should not be allowed. Still struggling. No defining conclusions.

You are right about the depreciation. I'll ck on that, too. I followed another dep'n worksheet (prior year, before they came to me) and that might not have had the land included OR it truly has been over-depreciated. I'll ck my file...

Today I am challenged to TOUCH every dropped off return (about 20) before a new week begins...