Vacant Rental

[S T]

I have a LLC (husband/wife) with one rental unit, and file form 1065 with form 8825 attached for rental income and expenses, then flows through to the form 1040.

In 2007, rental was vacant all year, during a remodel and is still vacant., just now listed with a property manager for rent (8/08). According to the instructions in Pub 527, on page 2, for vacant rental property, t/p can deduct the ordinary/necessary expenses (including depreciation) for managing, conserving or maintaining the property while the property is vacant. Which would be insurance, garden service etc. The costs associated with remodel will be added to basis and depreciated.

Would the depreciation for remodel be deducted in 2007 or beginning when property is actively rented again?

Due to no rental income , the above would create a loss? So that would flow through on the K-1 form to the form 1040.

Since this is an LLC, how are the property taxes and mortgage interest deduction reported during vacancy? Are they deducted as usual on the 8825 form?

I have reviewed the prior posts on TTB
http://www.thetaxbook.com/forums/sho...=vacant+rental as well as other research, but what confuses me is how to report under the LLC.

Or, what is the alternative on reporting?

Guess I am concerned about the deductions and no income since it has been vacant for 18 months or more.

Thoughts are welcomed,

Sandy

[Roland Slugg]

Placed in service

Depreciation on the improvements starts when they are completed, and the unit is once again placed in a "For Rent" status.

[Skate1968]

I agree with Roland. He makes a good point. I recall a specific case in which a preparer was caught for erroneously depreciating rental property which had not yet been 'made available for rent.' Depreciating vacant rental property is fine provided that it is made available for rent.

[Gretel]

I have a LLC (husband/wife) with one rental unit, and file form 1065 with form 8825 attached for rental income and expenses, then flows through to the form 1040.

In 2007, rental was vacant all year, during a remodel and is still vacant., just now listed with a property manager for rent (8/08). According to the instructions in Pub 527, on page 2, for vacant rental property, t/p can deduct the ordinary/necessary expenses (including depreciation) for managing, conserving or maintaining the property while the property is vacant. Which would be insurance, garden service etc. The costs associated with remodel will be added to basis and depreciated.

Would the depreciation for remodel be deducted in 2007 or beginning when property is actively rented again?

Due to no rental income , the above would create a loss? So that would flow through on the K-1 form to the form 1040.

Since this is an LLC, how are the property taxes and mortgage interest deduction reported during vacancy? Are they deducted as usual on the 8825 form?

I have reviewed the prior posts on TTB
http://www.thetaxbook.com/forums/sho...=vacant+rental as well as other research, but what confuses me is how to report under the LLC.

Or, what is the alternative on reporting?

Guess I am concerned about the deductions and no income since it has been vacant for 18 months or more.

Thoughts are welcomed,

Sandy

Here is a link I found with some opinions.

http://www.taxalmanac.org/index.php/Discussion:Rental_property_expenses

I think if this was an active rental before the improvements all rental expenses that were deducted before the improvements are still deductible if the intent is to continue with the rental.

In my opinion it doesn't make any difference if on Schedule E or 8825.

[OtisMozzetti]

Rental Property, Undergoing Renovations, Depreciable?

In 2007, rental was vacant all year, during a remodel and is still vacant., just now listed with a property manager for rent (8/08).

Sandy

It seems clear to me that, for all of 2007 and for the first 7 months of 2008, the property wasn't actually "available to rent" (because it was being remodeled; we all can imagine what photos of the construction site would've looked like).

I asked this similar question here a month of so ago("Rental House Vacant Between Tenants" 7/15/2008), about the hiatus between tenants. The answers in this Message Board mostly all came back asserting that the property really was available for rental all the way through, although I said that the landlord wasn't willing to let any new tenant move in or agree to a lease.

So, the essence of this question really is whether depreciation, and other expenses, have to be capitalized while a rental house undergoes useful renovations that require a period of several months during which it is not feasible to have any tenants. I try to ask myself what the U.S. Tax Court would say about it.

[WhiteOleander]

Although the property is not suitable for renting, I do not believe it is out of service for depreciation purposes. The owner is doing repair/improvement to the property. But, it has not been pulled from the market because he no longer wishes to rent it.

If this were a widget machine on depr. and it was taken apart to repair and possibly improve, it would not be taken off depr. for that period of time. Even if it was a long period of time. Because the owner has not taken it out of service to not ever use it again.

This is my viewpoint.