Depreciation and expenses on rental property

[tsuewalker]

Client leased his rental home for January and February, 2012. House sat empty until November (ready to rent) when client made it his primary residence after foreclosure on the residence he lived in up until then. Would I claim 2 months of depreciation or 10 months since house was available for rent until November 1. He lived in home only in November and December. Also, would I use 2 or 10 months of expenses, etc.

Thank you for your help!

[Roland Slugg]

If the taxpayer has a way to document the fact that the house was available for rent during the time it was unoccupied, then I would treat it as a rental for those months. What documentation? A rental listing agreement with a realtor or leasing agent, signage (if the dates the sign was in place can be established) and advertising would all be helpful, but even a sworn statement by the taxpayer might be helpful.

If the taxpayer has no way to show the property was available for rent, then I would use fewer than ten months as rental in 2012, but perhaps more than just the two months it was actually rented ... maybe about six. The date foreclosure proceedings began on the owner's own residence might be a reasonable date to regard as the end of the rental status for the rental house.