Rental property issues

[KenB]

once again, brain is not yet working at 100%

If client buys property in 2005, starts renting in Sept 2006, but property was available to live in for all of 2006 and couldn't get anyone until Sept:

When I start depreciation, is my start date 9-1-06 or 1-1-06?

on Interest, taxes and insurance, take the whole year off on E or only prorated
amount from Sept-Dec? if 2nd option, what to do with pre Sept amounts?

Thanks for any help, Ken

[TMI Moderator]

Page 9-12 of TTB,

"Property is considered to be placed in service when it is ready and available for a specific use, whether in a business or an income-producing activity."

Also, in the "Did You Know" section, "Qualifying property is considered placed in service even if the property is not being used."

A rental activity, like a business, "starts" when all the factors are in place, whether or not someone actually rents out the property. The "rental activity" will start whether the landlord has signed up a renter or not. Sort of like the grand opening for a retail store. The business "starts" the moment the doors are opened to customers whether or not anyone buys anything.

[KenB]

Thank

Paul, excellent explanation, I really appreciate your input.

Thank You, Ken

[jainen]

I might balk

>>property was available to live in for all of 2006 and couldn't get anyone until Sept<<

When rental property is vacant for a long time, more than six months, I question whether it was actually "available." I look at things like reasonable rent, efforts to advertise, upgrades or repairs in progress, and compliance with local permits. If the client says, "We couldn't find anyone to rent it, so we decided to spend the summer there and finish putting in the new walls," I might balk.