House rental

[TAX]

Client has house (old church bldg), he purchased in year 2006. Just sitting there. Intent was to rent. Tried harder in 2006 but no luck. He also took deduction in 2006 for expenses and depreciation.

2007 nothing happened. No return has been filed yet.

Now he wants to demolish in 2008.

Do I need to recapture dep. in 2007 because it was not rented?

What about all expenses that he deducted in 2006 such as advertising, property tax, interest etc?

Thanks

[Roland Slugg]

If your client made a legitimate attempt to rent the building, I see no reason why he can't/shouldn't deduct the expenses on Schedule E. The PAL rules may limit his deduction, but he'll get it eventually.

If he razes the building, depreciation stops but none is recaptured. The remaining basis of the building is then added to the basis of the land.