Sale of residence

[Unregistered]

Is anyone aware of the opportunity to avoid the taxation of depreciation taken on a personal residence that has been used as a rental property after May 6, 1997?

I remember discussion a couple of years ago of not having to recapture the amount of depreciation claimed if the rental activity was located in an area that had undergone a depressed real estate market, and the rental was undertaken to maintain the home until a more suitable time to sale to property.

Any information would be greatly appreciated.

[Ken]

depreciation

I have never heard of that. As far as I know, if you rent your house out and depriciate it, you must recapture that depreciation upon the sale of that residence.

[jimmcg]

jim mcg

Never heard of that either. If it is true and not the product of wishful thinking I would appreciate a cite.

[Gene V]

temporary rental

This is how the pub read before May 7, 1997--you might be thinking of this. I think all of this has changed.


TEMPORARY RENTAL OF HOME BEFORE SALE. You have not changed your home to
rental property if you temporarily rented out your old home before selling
it, or your new home before living in it, as a matter of convenience or
for another nonbusiness purpose. You postpone the tax on the gain from the
sale if you meet the requirements explained earlier.

For information on how to treat the rental income you receive, see
Publication 527.

[Armando Beaujolais]

Is anyone aware of the opportunity to avoid the taxation of depreciation taken on a personal residence that has been used as a rental property after May 6, 1997?

I remember discussion a couple of years ago of not having to recapture the amount of depreciation claimed if the rental activity was located in an area that had undergone a depressed real estate market, and the rental was undertaken to maintain the home until a more suitable time to sale to property.

Any information would be greatly appreciated.

Could it be that in a depressed market there may be no gain, ergo no depreciation recapture?

[Gershwin Samuel]

What is the advantage of not recapturing depreciation on the sale ?

[jimmcg]

Depreciation Recapture

Depreciation recapture is generally taxed at a rate higher than the long term capital gains rate. It is generally the lessor of the recognized gain or the recapture amount. Therefore the less the recapture the lower the effective tax rate for the transaction.

[jainen]

discussion

<<discussion a couple of years ago>>

Discussing something does not necessarily make it so, and there is plenty to forget when you try to remember. Maybe the discussion was about how depreciation after 5/6/97 is different. Or maybe it was about the careless use of the term "recapture," which isn't actually what you do with straight-line depreciation. Or maybe the economic scenario was not a regulation but a situation in which tax planning strategies are needed, and temporary rental could be exempt from depreciation and therefore recapture. Maybe it was a state law, or maybe it was some nonsense out of corporate accounting. Maybe it was a lie, one of those tax avoidance scam seminars. Maybe you just got it wrong, because I don't think there were any depressed housing markets two years ago.