rental prop ceases operation

[goodcat]

Client had rental prop in prior years, but no rental activity since 2007 whereas, prop sat vacant since then. In 2013 prop was foreclosed on and 1099C issued.
Isn't there a rule that states "rental prop ceases to be and doesn't convert to residential prop, it then reverts to investment prop and there is no recapture of Depreciation and all you have is a loss or gain from basis to sale with no recapture. Right, wrong,

[taxea]

I would bet you could find your answer in the Rental publication.

[ATSMAN]

I am not aware of that rule but I have a few clients who have used a former rental property as their personal primary residence to take advantage of the $500K CG exclusion (with adjustment for the period of non permissible use).

[TaxGuyBill]

It may be investment property, but the depreciation doesn't just disappear.

The depreciation still lowers the basis, and if it is sold at a gain, the capital gains on the depreciation will be taxed at up to 25%. If it is sold as a loss (after the reduction of basis due to depreciation), there won't be any capital gain (including on the depreciation).