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6198 - at risk

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    #1

    6198 - at risk

    I had a new client this week with an interesting return, a little challenging. Just because he had a rental house in Ocean Springs, MS that received a lot of damage. Since he sold a farm in Iowa last year and had a large gain, I am going to amend 2004 and take the loss on that return as it will offset gain on farm.

    Also wife received SS disability this year and received money for 2004,2003 and 2002. So I am going to do the worksheets related to that situation. Have to amend 2004 before I can figure SS disability.

    Anyway, that is the background. I asked him to get me depreciation schedule from previous preparer so I could see depreciation figures for rental house. He got last years as well as copies of 2003 and 2002. On the 2004 return he has 3 rental properties listed and one is a farm in Iowa. But then the sale of the farm in Iowa is on Schedule D. Even if it was only land that sold, wouldn't it still go on 4797 first?

    Then I noticed another rental on the 2002 return - house in Blue Ridge, Ga. But the loss on it is on the 6198 and the loss is not taken. There were other rentals with gains. He told me in conversation that they had a vacation house in Georgia. I am not very familiar with the 6198 but would that have something to do with not taking the loss on that rental.

    I'm just trying to figure out what this guy did.

    Thanks.

    Linda F
    Tags: None
    #2
    Interesting Clients

    Linda, I would have this guy file an extension. This situation is unreal for this time of the year. You need more time for this return.

    Comment

      #3
      More info

      Client brought in some additional forms I needed. I asked about the property in Georgia. When it was rented in 2002 and 2003 was before they began to use it personally. He bought the property from a realtor who was building a new "castle" up on the hill. The realtor continued to live in the house and pay rent until his home was finished. So there was no mixture of use. Just a straight rental. So I don't understand why the loss was not taken as other rental properties showed a gain. He has it on form 6198.

      Linda F

      Comment

        #4
        Form 6198 is used only if the taxpayer is not at risk for the loss. If money was borrowed to fund the operation and the taxpayer is not liable to re-pay the loan, or something along those lines.

        I agree. I see no reason why a rental loss would need to be limited on Form 6198.

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