basis of house

[kaynik]

client was just audited - o rental income way too much expenses turns out it was new wifes personal residence turned to rental but he has NOTHING to show this as soon as the auditor found it was sold in 06 she disallowed rental in 05 stating it was investment property. OK so the auditor tells me to add the mortgage interest to basis and the taxes (listed on 05 but paid at closing in 06) to schedule A (06)

I thought interest addition was for new construction ?? and I would hav e added taxes to the basis I have done this in the past for a vacant lot held many years and it cleared an audit

Ive been running thru my resources and find nothing to put in my hand to add the taxes to the basis It will help me eliminate the AMT on corrected return if I can do this

[erchess]

My two cents

I have been watching this thread and I truly hope someone with more audit experience than I have will respond. NYEA and Bees, where are you?

However I agree with you that I would not have thought you could do as this auditor suggests. I think I would either ask for another auditor or I would ask the auditor to put the suggestion in writing and if this was done, follow it. If challenged I would smile sweetly and say that I assumed that the auditor knew something I did not.

[kaynik]

basis of house

received "adjustments" today auditor allowed the interest on schedule A - (not what she told me in audit) taxes were not paid til 06 If I can add taxes to basis I will eliminate the amt I will go for it

You may be right about the auditor I has been 10 years since I have been on an audit - and I got this goodie Auditor did not allow that original return had PAL after the disallowance of one of the rentals PAL did not come into play

she also did not seem to notice that no depreciation was taken on the allowed rental

I have changed the bill from 4800 to 83 I will see how things go on our face to face next week for the following year and turning in changes for this year\\

Thank you for your input My confidence is returning