Rental House

[Bonnie]

Taxpayer had a house that he originally bought as his main home. He is military so moves a lot. He began renting he house in Sept 2006 because the Army moved him. In April 2009 he moved back into his house and lived in it til Oct 2011 at which time it became a rental again. Trying to figure out how to handle the depreciation. Do I entered the date in service as Oct 2011? Or would I go back to the original rental date of Sept 2006? If I did that then what would happen to the depreciation lost during the time he lived in the house? Feeling like I would start over with the 2011 date and then maybe add in the depreciation already taken in the prior years. Not sure how to handle this. Any helped appreciated.

[RitaB]

My totally unresearched opinion

Feeling like I would start over with the 2011 date and then maybe add in the depreciation already taken in the prior years. Not sure how to handle this. Any helped appreciated.

My thinking is that you are on the right track, but I think you would start depreciating with the 2011 date and a new basis (original basis minus depreciation already taken). The end result is the same as what you suggested, I do believe.

This of course is my best Wednesday morning off the cuff answer, and worth every penny you paid for it. And, I would put a smiley here if I remembered how.

Edit: Found it!

[Roland Slugg]

When the home was converted to a rental in 2006, its starting depreciable basis was the lower of its adjusted basis or its FMV at that time. (Regs 1.168(i)-4(b))

When the home was converted back to personal use, that was a disposition. However, that conversion does not result in a gain, loss or depreciation recapture. (Regs 1.168(i)-4(c))

When the home was converted to a rental again, in 2011, its starting basis for depreciation was, once again, the lower of its adjusted basis or its FMV at that time, and depreciation starts anew using a 27.5-year life. Remember, the home's basis as of the 2011 conversion will be lower by the amount of depreciation deducted (or deductible) from September 2006 to April 2009. However,if its FMV as of October 2011 was even less than that, then you will use the lower amount as the basis for depreciation starting in 2011.

[taxea]

I do it the way Rita B suggested.