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Residentail Rental Less Than 1 Year

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    Residentail Rental Less Than 1 Year

    My client bought a house in 2017 and began renting it out. In May 2018 she stopped renting it out and moved into it. I assume in 2018, since there was no personal use, I treat it like any other rental property, correct? Then in 2018, is it treated like a vacation home or like any other rental property for the 4 months it was rented before she moved into it? I seem to remember that to avoid vacation home rules there has to be a rental period of at least 1 year but I can't verify this remembrance. .

    #2
    a sentence in your post is confusing to me. "I assume in 2018, since there was no personal use, I treat it like any other rental property" was the property used as rental property from January to May? I think you are thinking of using your vacation home but it is not for a year, it is more likely 14 days . )not clear as to number of days). it is not a vacation home if she moved in and lived there until end of 2018, I think it was converted to personal property in May. I never had situation like this when doing returns.

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      #3
      It should be treated like rental property until it is converted to personal use. This isn't a vacation home based on what you've written. It's rental property that's been converted to personal use.

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        #4
        Originally posted by Maude Lebowski View Post
        It should be treated like rental property until it is converted to personal use. This isn't a vacation home based on what you've written. It's rental property that's been converted to personal use.
        Agree completely. There is no "vacation home" issue in play here.
        Biggest challenge will be to see what pieces of expenses go to Schedule E for 2017 and 2018 and (perhaps) to Schedule A for 2018.
        Don't forget depreciation calculations either, and cost basis adjustments for the now personal residence.
        Most professional tax software will take you through the steps, if assistance is needed.

        FE

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          #5
          I called NATP research before I saw these responses, The researcher said for 2017 treat it as a rental property, In 2018 use the vacation home rules as the house was rented for 6 months and used personally for 6 months. This makes sense to me. I believe what I was thinking about goes like this. You convert a personal residence to rental property in April. If it is rented for a year or more you ignore the vacation home rules. If rented for less than 1 year then the vacation home rules apply. In this case they only apply in 2018 as there was zero personal use in 2017. in the case of an April conversion the vacation home rules would apply in both years.

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            #6
            I don't follow the logic: Are you saying that any rental property, with a prior history of being rented (unknown months in 2017 in this case), somehow then automatically converts to "vacation property" if done so early in the year of conversion? ? ?
            Conversely, what would you have done if the 2018 conversion occurred in November of 2018?
            (I guess I need to review the concept of "vacation home." I always thought it was for a personal residence or second home that was rented for a limited amount of time versus days of "personal use" and then calculated restrictions were placed upon the amounts of "rental expenses" that could be used on Schedule E based upon the actual number of days of rental. Never heard of rental characterization switching from "full rental" to "vacation home rental" merely because of some calendar dates.)

            FE

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