Looking for clarification for a client who converted a personal residence to rental property about 5 years ago. The home was purchased about 30 years ago and was sold during 2011. For purposes of determining gain or loss, is the basis the original purchase price of the home circa 1980 plus any improvements? Appreciate anyone's input.
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Converted Property
Her basis is:
the lesser of--
her original purchase price plus improvements, or
the FMV on the date it was placed in service as a rental property,
minus depreciation allowed or allowable over the last five years.
See page 12 of IRS Publication 946.
BMKBurton M. Koss
koss@usakoss.net
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The map is not the territory...
and the instruction book is not the process. -
I disagree.Originally posted by Koss View Post
Page 12 of IRS Pub 946 is talking about depreciable basis - the basis you use in calculating depreciation for the rental property.
Basis for purposes of figuring gain or loss depends on whether it is a gain or loss.
TTB, page 6-3 says for property changed to business or rental use and sold at a gain, you use the adjusted basis (cost plus or minus adjustments to basis) at the time the property is sold.
For property changed to business or rental use and sold at a loss, basis for recognition of loss is the lesser of (1) adjusted basis, or (2) FMV at the time of the conversion, plus or minus adjustments to basis after the conversion.Comment
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Sale of Property
I stand corrected. I was thinking about depreciation and not about a sale or disposition.
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.Comment
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rental to personal and then sale
What if a rental property is converted to personal and later sold, is there a recapture
of depreciation if later sold after being a personal residence? Is there a certain number
of years the property has to be personal?
DixieEAComment
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Basis
Most appreciated BeesKnees and Koss! Thanks for taking time to help!Comment
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Client's response to basis
Advised client that we would need to construct the basis of their rental property including any improvements. She advised that she spoke with God last night and did some meditating and did not believe this was the proper way to determine any gain on sale. Is anyone aware of God representing a client before the IRS?Comment
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