What kind of property is it?

[NotEasy]

Taxpayer bought a property in 2004 and sold it in 2010.

In 2004 and 2005, the property was his primary residence.

In 2006 and 2007, the property was vacant.

In 2008, 2009 and 2010 before it was sold, the property was for rental.

He sold the property in 2010 at a loss.

How would you report the sale? Do you consider it:

1. Sale of his home.
2. Sale of an investment property
3. Sale of a rental property

What is your opinion?

[spanel]

Taxpayer bought a property in 2004 and sold it in 2010.

In 2004 and 2005, the property was his primary residence.

In 2006 and 2007, the property was vacant.

In 2008, 2009 and 2010 before it was sold, the property was for rental.

He sold the property in 2010 at a loss.

How would you report the sale? Do you consider it:

1. Sale of his home.
2. Sale of an investment property
3. Sale of a rental property

What is your opinion?

Did he ever actually rent it?

Chris

[Burke]

In 2004 and 2005, the property was his primary residence.
He sold the property in 2010 at a loss.
How would you report the sale? Do you consider it:
1. Sale of his home.
What is your opinion?

Well, he does not meet the 2 out of last 5 years rule for personal residence use, so that does not look like an option.

[NotEasy]

Did he ever actually rent it?

Chris

Yes he did...until a few months before it was sold. He tried to look for new tenant but the property was sold because he could find one.

[NotEasy]

Well...I have an update.

His father gave me the time line. But it looks like he was not that accurate, I talked to the taxpayer personally today. This is the actual time line according to him.

In 2003 to 2006, the property was his primary residence.
He moved out in 2006 and it became rental immediately until it was sold in 2010.

Therefore, the possibility of it being an investment property is now out of question.

So it is either his home or a rental property when it was sold in 2010.

I'd say it was a rental property. The obvious reason is that it had been for rental for 4 years before it was sold in 2010.

Anyone disagrees?

[Y2KEA]

Based on info in OP's last post, it appears to be sec1250 rental property.

OP says it was sold at a loss. But was it?

What was FMV on the date placed in service vs TP's adjusted basis?

Which value was used for depreciation? I'm assuming depreciation WAS claimed.

Correct adjusted basis on date of sale will determine gain or loss.