Rental deduction

[TAX]

Can Client take rental deduction of his home which he intended to rent but could not in 2010?

Example: Depreciation, Advertising etc.

[ChEAr$]

Can Client take rental deduction of his home which he intended to rent but could not in 2010?

Example: Depreciation, Advertising etc.

YOu mean he intended to rent out part of his HOME?
Or are you talking about renting out a whole house to another?

There is a difference between a house and one's home.

[TAX]

He wanted to rent entire house as he bought new one.

[ChEAr$]

He wanted to rent entire house as he bought new one.

So then, what did he do besides have good intentions (with which the road to hell is paved!)
No, unless he had an active renter, I don't see any rental activity.

[S T]

My understanding, intentions of converting to a rental are not relevenat for tax purposes, it is when the property becomes an "active" rental.

What is active rental - there are some prior discussions on this board, as well as Pub 527 around page 16 - "property held or used for rental purposes" I believe the date of conversion would be the actual date the t/p acquired a tenant.

What did your t/p do to change the property to rental - listing with a property manager, advertising for rent, etc.

Sandy

[Gary2]

You don't need a tenant, it just needs to be legitimately available for rent. Having it listed with an agent or taking out ads are usually adequate of proof of availability (subject to any dates specified in the ad, etc.)

[taxea]

Gary is right but how long was it available to rent? How much work was put into finding a tenant? Depending on the condition of the home and maybe the neighborhood I doubt the IRS would fall for a house being unrented all year unless little effort was put into getting it rented. How much in expenses are you talking about?

[S T]

Yes

Yes, Gary is correct, and my prior post probably did not explain that well. I believe it would be a "facts and circumstance"

If the t/p had placed the property on the rental market and could show evidence that the rent was a "realistic" for rent value, and had the documentation to show that there was advertising, or placed with a property manager for rent, etc - a reasonable amount of time, I would probably place on a Schedule E.

However, if the t/p had not made the earnest effort as in a realistic rent value, advertising, utilizing a realtor, or property manager for rent, and had only accumulated expenses and it had been for most of the year - I would have to take a very strong look at whether or not the expenses would be a deductible rental item.

Sandy

[snowshine]

I have been told by my local IRS agents that rentals with no gross income and expenses other than taxes, mortgage and depreciation are an automatic office audit. I have done 6 of these in the past year for the big box I work for. I have seen 2 different IRS agents: One takes a strict line that a renter must be present unless the TP hires a rental agent, while the other will allow newpaper adverts, Etc. to prove active rental participation. They made our TP's capitalize all non-deductible expenses over 27.5 years and adjusted the returns accordingly.

[kpangelinan]

I have been told by my local IRS agents that rentals with no gross income and expenses other than taxes, mortgage and depreciation are an automatic office audit. I have done 6 of these in the past year for the big box I work for. I have seen 2 different IRS agents: One takes a strict line that a renter must be present unless the TP hires a rental agent, while the other will allow newpaper adverts, Etc. to prove active rental participation. They made our TP's capitalize all non-deductible expenses over 27.5 years and adjusted the returns accordingly.

Not automatic in my neck of the woods as it happens often in rural Maine, NH and VT, all of which I have clients who rent multiple units and each year, have one or two properties with no income. I've been doing these returns for almost a decade with not a peep from the IRS. It happens a lot. And these people aren't real estate professionals.