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    Primary to Rental Property

    New to the forum, and appreciate anyone who can assist me with this question.

    I have a client who purchased a property in 2012 and live in until in 2018 they rented the property. They continued this rental going into 2019 for 6 months, and then sold it. From what I have read, and understand, they have to pay capital gains on this property since it is considered an investment property, and since they didn't live in it as a primary residence after selling the home. Lastly, not sure if this is important, there was depreciation on the property

    Thank you in advance

    #2
    Did they live in it as their principal residence two out of the last five years before the sale date? Did you check TTB 6-19? TTB has other references and a worksheet, if needed.

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      #3
      The taxpayer can not exclude the portion of gain equal to any depreciation claimed or allowable. Use the worksheet in your tax software.
      Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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        #4
        Lion They did not, only prior to the property being rented. They sold the house last year in June Thank you guys for the information!

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          #5
          Originally posted by JennieP View Post
          Lion They did not, only prior to the property being rented. They sold the house last year in June Thank you guys for the information!
          As reply poster LION recommends in The Tax Book and also do a “search” on this site for your topic because there are similar posts that may give you some insight.
          Always cite your source for support to defend your opinion

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            #6
            Five years before the 2019 sale would be 2014. You said they didn't rent it until 2018. Was it their principal residence during 2017 and 2016 and earlier? Or did it sit vacant? Why are you saying "They did not? That wasn't a long rental, so the depreciation will not be a large amount that cannot be excluded. Do some research and "searching" to find some information that fits your clients' situation to try to save them some taxes.

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              #7
              Originally posted by Lion View Post
              Five years before the 2019 sale would be 2014. You said they didn't rent it until 2018. Was it their principal residence during 2017 and 2016 and earlier? Or did it sit vacant? Why are you saying "They did not? That wasn't a long rental, so the depreciation will not be a large amount that cannot be excluded. Do some research and "searching" to find some information that fits your clients' situation to try to save them some taxes.
              Reminds me of days of old when my tax instructor more or less pounded the table saying "depreciation - allowed OR allowable."
              Message didn't get across to some. I spent way too much time repairing tax returns for an employee who somehow decided that claiming depreciation on a Schedule E rental property was "optional" and/or too much bother.

              Comment


                #8
                Originally posted by JennieP View Post
                New to the forum, and appreciate anyone who can assist me with this question.

                I have a client who purchased a property in 2012 and live in until in 2018 they rented the property. They continued this rental going into 2019 for 6 months, and then sold it. From what I have read, and understand, they have to pay capital gains on this property since it is considered an investment property, and since they didn't live in it as a primary residence after selling the home. Lastly, not sure if this is important, there was depreciation on the property

                Thank you in advance
                Yes they can exclude because as i read it they lived in the property (and I assume it was their primary residence) for 2 of the last five years.

                They do have to add back in the depreciation though, even if they did not take it.

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