Rental Depreciation without Rental Income or Expenses?

[Kram BergGold]

My approach to this kind of Situation

Years ago a couple, new clients, scammed me into reporting the sale of their house as a single family. I totally believe that it was a multiple family house. After that experience I decided never to take a new client who sold real estate in the year they came to me.
I suggest you do as I do and walk away from this client.

[Rapid Robert]

The posts you reference are very understandable. The reply posters suggest important information a tax professional may ask a client in doing their "due diligence" to
get the necessary information from the potential client to make an informed position on how to/not to proceed with the engagement.

Please re-read what I wrote. I didn't suggest not interviewing the client, and not performing due diligence. What I said was, don't bother asking Steve anything. He's not your client, there are no married filing status returns involved, what he says is not going to support a position taken on the return, and I think we've read in subsequent postings that taxpayer has no contact with Steve anyway. And even if she did, how is her hear-say info about what Steve may or may not have included in his returns reliable? It's not like Steve is signing the return.

Would you really sign a return with a position based on hear-say from some unrelated taxpayer?

[Burke]

Poster substantiates he has closing documents, 1099-S to his client, that she received half the proceeds, and stated in the OP "he depreciated his share of the condo." Not sure how he knows that is what "Steve" did without looking as his tax returns, but she definitely must report the net proceeds, and gain on the sale assuming it is a gain. Since it is reported on 4797, I don't see how she can get past the "allowed or allowable" depreciation question. Steve probably had a net loss every year due to the expenses and depreciation taken. So he came out well by keeping all the income and only taking half of the depreciation, if that is what happened.

[kathyc2]

Poster substantiates he has closing documents, 1099-S to his client, that she received half the proceeds, and stated in the OP "he depreciated his share of the condo." Not sure how he knows that is what "Steve" did without looking as his tax returns, but she definitely must report the net proceeds, and gain on the sale assuming it is a gain. Since it is reported on 4797, I don't see how she can get past the "allowed or allowable" depreciation question. Steve probably had a net loss every year due to the expenses and depreciation taken. So he came out well by keeping all the income and only taking half of the depreciation, if that is what happened.

Pub 527 lists one of the requirements of being able to depreciate rental property as: "You use the property in your business or income-producing activity (such as rental property)."

It doesn't sound like she ever did, so I would say no to allowed or allowable. Since she never used it for income production, why can't she just report on D rather than 4797?

[kathyc2]

Would it make a difference on her basis if she was on the mortgage or not? If she was not liable for mortgage, it would seem logical that her basis would be her down payment, rather than 1/2 the house. I don't know if anything in the code would support that position or not, but it seems logical.....

[TaxGuyBill]

Pub 527 lists one of the requirements of being able to depreciate rental property as: "You use the property in your business or income-producing activity (such as rental property)."

It doesn't sound like she ever did, so I would say no to allowed or allowable. Since she never used it for income production, why can't she just report on D rather than 4797?

I agree.

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