Clients converted personal residence in Minnesota and moved to Arizona on a permanent basis. Was going to continue to rent out but decided to sell Minnesota residence instead. Converted in June 2014 so haven't filed any tax return for the rental income. I had heard that if you don't depreciate the property, you can claim no profit on the sale (if a gain) and use the 121 exclusion.The cost of the rental property is $400,000. Thinking there would probably be no gain on the rental anyway. Is it best not to claim depreciation pending the sale? Purchased home in Arizona. What is the best strategy?
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Was any rent received during 2014 or any previous year?
Do they meet the 2/5 exclusion? -
Yes
Yes, they received 7 months rental in 2014 and they have lived in the home until June 2014.Comment
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Sorry, had misunderstood original post.
If the tenant had moved out by 12/31/14 and no rent received in 2015, no depr for 2014. In other words, if they took the house out of service in the same year as put it into service then no depr.
If any rent received in 2015, then take depr for 2014 and for months rented in 2015 on the 2015 return.
Since they meet the 2/5 exclusion, they won't technically have gain, but will have recapture in 2015.Comment
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loss?
Also, if they rented for less than 1 year, then my understanding is they can't take the loss. You treat like a vacation home.Comment
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