Sale of home

[Unregistered]

A taxpayer has a side job and he does the works at home. He claimed one and only one year of 'business use of home' in 2001. Now he sold his home in 2006. How to determine whether the whole property is qualified to be his home or not? It's important to make the determination because of the capital gan exclusion for the sale of home.

[DonPriebe]

It's in the book ...

If the OIH was actually in his home (not a separate building) he excludes the gain as usual except for the depreciation. See Pub 523, page 17.

[Unregistered]

what if the taxpayer took OIH, but not the depreciation

I think I remember reading before that if the OIH deduction is taken and not the depreciation on the OIH you still must recapture the depreciation as if it had been taken. Am I right, or am I thinking of something else?

JoshInNC

[Bird Legs]

OIH Deprn

You are correct. Allowed or allowable.
An amended return could be prepared to claim the depreciation.

[Bill Tubbs]

Form 3115

I think I remember reading before that if the OIH deduction is taken and not the depreciation on the OIH you still must recapture the depreciation as if it had been taken. Am I right, or am I thinking of something else?

JoshInNC

Josh,

You are correct, the allowed or allowable depreciation must be recaptured. But...

My recollection off-hand is that Form 3115 can be filed in the year the asset (house) is disposed of (sold) to retroactively claim all the depreciation that should have been taken. I remember a Rev Proc to that effect, but no, I don't have the Rev Proc # handy. The question here is, how much depreciation are you talking about (how much $$ would you charge to file Form 3115?) and how much benefit would the client derive from that added form. Just a rough gauge here -- I charge $80 for a 1040 Itemized (including WI return), but would charge an additional $100 to take care of Form 3115.

Bill

[Unregistered]

Recapture

Let's see,,,mmmmmmmmm, one year office in home deduction.
100,000 basis, 10% of home used for office, depreciation allowed $182.00.

Hurry, run to the nearest person that can fix this huge problem.

[Bill Tubbs]

how big is the problem?

Let's see,,,mmmmmmmmm, one year office in home deduction.
100,000 basis, 10% of home used for office, depreciation allowed $182.00.

Hurry, run to the nearest person that can fix this huge problem.

The thread had led me to believe that there was OIH for many years but depreciation had only been claimed for one year -- hence my response. But it is tough to follow the "Unregistered" posts unless each one of them is manually signed (like Josh did in the 2nd Unregistered posting).

If only $182 (or so) of depreciation was taken, and no depreciation was missed when it should have been taken, then the last anonymous "Unregistered" is correct -- it is no big deal.

Bill

[Unregistered]

You are correct. Allowed or allowable.
An amended return could be prepared to claim the depreciation.

I think the question here is whether the unclaimed depreciation is considered 'allowed or allowable'.

If the taxpayer has filed Form 8829 each year but did not claim depreciation, then I agree the unclaimed depreciation should be considered 'allowed or alowable'. But what about if the taxpayer did not even file Form 8829 and have not claimed any home office expenses in those years? Does that one year which he has claimed the depreciation automatically made all the following years depreciation 'allowed and allowable' whether or not he has filed the Form 8829 to claim home office expenses in those years? I am very confused here.

[Bees Knees]

But what about if the taxpayer did not even file Form 8829 and have not claimed any home office expenses in those years? Does that one year which he has claimed the depreciation automatically made all the following years depreciation 'allowed and allowable' whether or not he has filed the Form 8829 to claim home office expenses in those years? I am very confused here.

No it is not automatic.

It is not whether or not the taxpayer filed Form 8829, and then whether or not the taxpayer claimed depreciation allowed or allowable. It is whether or not the taxpayer was entitled to claim depreciation allowed or allowable.

The rules are if depreciation is allowable, then the basis in the property must be reduced by the depreciation allowed. If the taxpayer could have filed Form 8829 and could have claimed a deduction for depreciation allowed, then it is as if the taxpayer actually did so, regardless of whether depreciation was actually claimed.

Having said that, since office in home rules are so hard to meet, (and thus so easy to not meet), the taxpayer could easily say he or she did not meet the office in home rules for those years that Form 8829 was not filed. Thus, if the home office did not qualify as one in those years, no depreciation was allowed for those years. It could be as easy as putting your cat box in the office for those years.