Client bought a rental property in 10/2015, he to do work to make it rental but did before the end of 2015, he advertised the rental but was unable to rent the first year (2015). I choose to depreciate the rental and the improvements that year, in 2016 he did more repairs to it and had an offer from someone to buy it. So he sold it on May 2016. Would I place all the repairs, supplies, utilities on the Schedule E, and put the closing costs on the 4797? He had closing costs when he bought it for $1,569.00 can he take this under the expenses on the 4797?
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Sounds like a flip to me! If you showed it as rental and he has proof he tried to rent in 2015 you would show the sale on 4797. The closing cost from original purchase should have been included in the basis for depreciation or amortized over the life of the loan depending what they were. see how it is a minimal amount I would just add to 2016 basis but others will disagree and technically may be correct. If a gain it would be short term ordinary income.
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