Cooperative Apartments

[Chief]

Have a client who owns and lives in a cooperative apartment in a large complex. He has owned for several years an apartment nearby in the same complex that he uses to house relatives and friends when they come down to visit. He sold the second apartment last year in preparation of moving back to his home state.

Of course the value of the apartment sold has increased a good deal since he purchased it. Now can he depreciate this property over the years that he has owned it? I say no, since it is has never been used for business or rental purposes. What do you think?

[Bees Knees]

I'm not sure why he would want to depreciate it. If depreciation were allowed, then he would have depreciation recapture when it was sold.

Depreciation only applies to business and investment property. If it was used for personal purposes, such as housing relatives rent free, then it is treated as a second home - not subject to depreciation.