Filing Threshold

[Burke]

MFJ - TP's both over 65, filing threshold is $23,200. Only income is Social Security (combined) of $11,062 and gross rents of $10,611 from their residence. No tax liabilities. Do they really have to file?

[spanel]

MFJ - TP's both over 65, filing threshold is $23,200. Only income is Social Security (combined) of $11,062 and gross rents of $10,611 from their residence. No tax liabilities. Do they really have to file?

Might not have a federal liability, what about state?

Chris

[FEDUKE404]

Possible issue

Tracking depreciation on the rental property ?

FE

[Twin Turbo Z]

City Tax ?

[Burke]

Might not have a federal liability, what about state?

Chris

No state liability.

[Burke]

Tracking depreciation on the rental property ?FE

That was my quandary. These are new clients, relatives of old clients, who are out of the country. Last year's return showed nothing for depreciation so it is a little difficult to reconstruct, but I FINALLY got the info to do it. So I am going to file it, even though there is no tax incurred. I cannot find any minimum for filing pertaining to gross rents, only overall income.

[Gretel]

That was my quandary. These are new clients, relatives of old clients, who are out of the country. Last year's return showed nothing for depreciation so it is a little difficult to reconstruct, but I FINALLY got the info to do it. So I am going to file it, even though there is no tax incurred. I cannot find any minimum for filing pertaining to gross rents, only overall income.

Here are my 2 cents (Federal only):

1. From PUB 554 (same principle should apply to gross rents):
Self-employed persons. If you are self-employed in a business that provides services (where the production, purchase, or sale of merchandise isn't an income-producing factor), gross income from that business is the gross receipts. If you are self-employed in a business involving manufacturing, merchandising, or mining, gross income from that business is the total sales minus the cost of goods sold. In either case, you must add any income from investments and from incidental or outside operations or sources. See Pub. 334, Tax Guide for Small Business, for more information.

2. Depreciation allowed/allowable: If depreciation does not result in any tax benefit, it also does not need to be recovered upon sale. Some years ago I had this issue relating to a home office but I forgot who this was to even try to find the results of my research. I doubt that a tax return needs to be filed in order to proof but certainly the calculations proofing that there was no tax benefit will need to be available.

[Roland Slugg]

So I am going to file it, even though there is no tax incurred.

Why? Just for the fun of it? I would never advise a client to file an unnecessary return. Just track the depreciation on the side.

I cannot find any minimum for filing pertaining to gross rents, only overall income.

For purposes of meeting the filing threshold, these people's gross income is $10,611 ... the gross rents. The only portion of social security benefits that are counted is the taxable amount, which in their case is zero. They are well below their $23,200 filing minimum.

[New York Enrolled Agent]

That was my quandary. These are new clients, relatives of old clients, who are out of the country. Last year's return showed nothing for depreciation so it is a little difficult to reconstruct, but I FINALLY got the info to do it. So I am going to file it, even though there is no tax incurred. I cannot find any minimum for filing pertaining to gross rents, only overall income.

Roland is correct in his response - based on what you posted the gross income = $10,611. The amount of gross income will trigger the need to file. Your client is under the threshold to file.

I think you were looking for a cite. Reg. §1.61-8 is where you find that gross income includes rentals received or accrued for occupancy of real estate.

[TaxGuyBill]

Why? Just for the fun of it? I would never advise a client to file an unnecessary return.

Although it is not necessary, in my opinion it is not a bad idea to file one anyways. It starts the Statue of Limitations and it decreases the probability somebody else will file a false tax return using your information.

[Burke]

Here are my 2 cents (Federal only):

2. Depreciation allowed/allowable: If depreciation does not result in any tax benefit, it also does not need to be recovered upon sale. Some years ago I had this issue relating to a home office but I forgot who this was to even try to find the results of my research. I doubt that a tax return needs to be filed in order to proof but certainly the calculations proofing that there was no tax benefit will need to be available.

Do you have a cite for this?

[spanel]

Here are my 2 cents (Federal only):

2. Depreciation allowed/allowable: If depreciation does not result in any tax benefit, it also does not need to be recovered upon sale. Some years ago I had this issue relating to a home office but I forgot who this was to even try to find the results of my research. I doubt that a tax return needs to be filed in order to proof but certainly the calculations proofing that there was no tax benefit will need to be available.

My opinion is this incorrect.

Allowed/allowable means you have/had the option to depreciation, whether you did or didn't isn't the point.

On the sale of the property, you must figure what depreciation was taken/should have been taken.

The lack of benefit from the depreciation doesn't come into play.

Do we look at each tax return that was ever filed? No benefit this year, 10% reduction the next? I think not.

Chris

[TaxGuyBill]

2. Depreciation allowed/allowable: If depreciation does not result in any tax benefit, it also does not need to be recovered upon sale. Some years ago I had this issue relating to a home office but I forgot who this was to even try to find the results of my research. I doubt that a tax return needs to be filed in order to proof but certainly the calculations proofing that there was no tax benefit will need to be available.

I never heard of that either, so if you can find your research, that would be interesting to see.


Burke said they receive rents "from their residence". Do they rent out part of their home, and the home will probably qualify the $250,000/$500,000 exclusion? If so, the §121 exclusion CAN cover the gain based on depreciation not actually taken.