Rental property sold - where to put expenses?

[Jesse]

Brain’s a bit tuckered, but here goes…….

Taxpayer had commercial rental property that sat vacant in 2011 for the first 10 months and finally sold in November at a large gain, but between mortgage interest, property taxes and insurance there is a Schedule E loss in excess of $40,000. On the closing statement there are utility and water expenses of almost $8,000 which are paid out of the sellers funds.

Would this $8,000 be expensed on the Schedule E? Or reduce the amount realized?

Also there are loan fees that had been amortized with a remaining balance of just under $5,000. Since there is a complete disposition the remaining fees can now be deducted, but where? Would I just enter it in on the Schedule E as other expense with an explanation?

[Roland Slugg]

Yes, the utilities paid from escrow are deductible as rental expenses on Schedule E the same as if the seller had paid them prior to COE. The remaining, unamortized loan costs are deductible as a rental expense, too ... not as a cost of sale like the R/E commission, escrow fees, etc. Report on F-4562 and deduct on Schedule E.