Residential rental & residence

[Bird Legs]

Client purchased home in Sept. 1984. This was residence until June 30, 1988. Converted to rental on July 1, 1988 and remained rental through July 2001.
Became residence on August 1, 2001 and remained residence through November 30, 2003.

Reconverted to rental property on December 1, 2003 and remained rental through
June 30, 2005.

It was then placed on market for sale and subsequently sold.
Question: When it was converted back to rental on December 1, 2003 what method, life,
etc. would you use?
What was originally used in 1988?
Because client did live in it for 2 out of the 5 years prior to sale, then Sect. 121 would apply.
Also, only the depreciation taken after May 6, 1997 would be recaptured.
Help please. This old man needs all the help he can get.

[Mark Goldberg]

Depreciation

In 1988 I would have started depreciating the residence using MACRS 27.5 years.
When I started the depreciating up again I would just pick up where I left off.

[Bird Legs]

Thanks Mark

Another question. Facts. House cost $95,437. Improvements $78,745. Land $16,692.
House sold July 15, 2005 for $125,000.
Depreciation taken as follows: Prior to May 7, 1997 $28,216. After May 6, 1997 $18,258. Total depreciation taken, $46,474.
There are suspended passive activity losses, rental, carried forward from prior years of
$5,056.
Gain on sale of residence qualifies for Sect. 121 exclusion. Clients residence for period
August, 2001 through November, 2003, then reconverted back to rental.
This meets the 2 years out of 5 for residential purposes.
My mind is blank. How is the $18,258. of deprn. recaptured?
How are the Suspended Passive Activity losses claimed?

Have developed shingles from the top of my head down to waist. Right side of body
and am not thinking as well as I should be.
Thanks for any help.

[S T]

Shingles??

Oh Bird,

Have you been diagnosed with Shingles? You are about the 6th person that I know that has been diagnosed with Shingles in the last 6 months. Age has nothing to do with it. I know of 24 year olds, 52 years olds and yes older people as well.

What is going on? More people are developing this condition! Is the Stress level so high, that is what the Doctors blame it on?? It is suppose to be a "latent chicken pox" virus that remains in your system and under high stress can outbreak.

I do understand it is really painful!

Actually one of my Secretaries was diagnosed this last week with it, but it only was an outbreak from her back (under her angel wing) to the front of the chest and under the armpit. Yes she is in pain! Doctor said Ibuprofen, and then gave her some other meds and a cortisone treatment.

Get better soon!

Sandy

[Bird Legs]

Shingles

Thanks, Sandy.
Yes, it is painful. Am taking Advil for pain, Valtrex for Herpes and Prednisone for the
shingles.

[Y2KEA]

Post 5/6/97 depreciation is recaptured at 25%.
Prior PAL's are allowed in full on schedule E in the year of complete disposition.

[natiro]

House sale

Am I missing something? From the figures you provided, it looks like there would be a loss (95,437 + 78,745 + 16,692 - 46,474 = 144,400 basis). So, if house sold for 125,000, wouldn't there be a loss? If so, I would report as a rental activity, take the loss, and free up the suspended losses. However, if I am missing something here and there is, in fact, a gain on the sale which you want to exclude with Sec 121, the suspended passive losses are lost. They are only allowed in a fully taxable transaction. If you exclude gain under Sec 121, the transaction would not be fully taxable.

Please let me know what I missed!

[Bird Legs]

Natiro

The total cost of house is $95,437. consisting of Land $16,692. & Improvement $78,745.
The $46,745 is depreciation previously taken.

[natiro]

Rental

Oh, duh. . .seems so obvious now!

Anyway. . . now that I see the error of my ways. . .what I said about the suspended passive loss still stands. . .can't take them if property is not disposed of in a fully taxable transaction.

Thanks for the clarification!