2nd home used personally and as rental property-loss on sale in 2013

[appelman]

Unless I misunderstand the post...

The property was a 2nd home in 2011 and 2012. I.e. it was no longer a rental when it was sold. It would appear that it was converted FROM a rental to a 2nd home.

missing something?? It is converted to a rental.. When it is converted the basis HAS to be adjusted to the lower of COST or FMV then. If you have a loss on the sale then you take it. If you were not getting a fair market value rent on it-it may be thrown out as a good conversion. IRS always has "step transaction" to throw it out, but if it passes on the conversion and you have a loss take it. It would only be the decrease in value for the two years.

I think the toughest problem is how long to hol as a rental. The unkown, but two years seems fine.

[JON]

I am

missing something?? It is converted to a rental.. When it is converted the basis HAS to be adjusted to the lower of COST or FMV then. If you have a loss on the sale then you take it. If you were not getting a fair market value rent on it-it may be thrown out as a good conversion. IRS always has "step transaction" to throw it out, but if it passes on the conversion and you have a loss take it. It would only be the decrease in value for the two years.

I think the toughest problem is how long to hol as a rental. The unkown, but two years seems fine.

[appelman]

I agree with Kram.

I have dealt with the situation where someone converts a residence to rental. In this case you make two calculations. For loss you compare sales price to FMV at time of conversion. For gain you compare sales price to cost plus improvements. To deduct a loss you have to have a loss in the first calculation and no gain in the second calculation. However, when you take a rental and convert to personal use I think you are selling a non business asset and the loss is not allowed.

Once it's a residence, it's treated as a residence unless and until its status changes again.

[Kram BergGold]

I say no loss

I have dealt with the situation where someone converts a residence to rental. In this case you make two calculations. For loss you compare sales price to FMV at time of conversion. For gain you compare sales price to cost plus improvements. To deduct a loss you have to have a loss in the first calculation and no gain in the second calculation. However, when you take a rental and convert to personal use I think you are selling a non business asset and the loss is not allowed.

[JON]

I think,

but be careful = if it was solely a rental at fair market value for 2 years you can get the loss. Now it is a gray area, but if the conversion was legitimate and not done knowing of the loss(?) and only for that reason, maybe your there. The gray is all over this issue, but I have heard it before if the change in property use is good you get it. Now if it was up for sale for the majority of the time it was held for rental-that could hurt. GRAY

[ATSMAN]

How was the loss calculated since it was a rental for a # of years.

[Dale Watkins]

A couples out of state 2nd home was used personally and as rental property from 2005 to 2011. It was only a 2nd home in 2012 and 2013, when it was sold at a loss of 45K. How much of that can be taken as a long term capital loss? Any?