Discussion:Allocation of Interest Expense on Rental after Sale

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Discussion Forum Index --> Tax Questions --> Allocation of Interest Expense on Rental after Sale

Pokybmw (talk|edits) said:

1 May 2006
I have a client that had a rental property that was sold in 2005. The loan to purchase the property was attached to another rental property and allocated to this property. Now that it was sold on installment, they have a note for about 1/2 of the sale price and used the cash received on other rental properties, but the loan was not repayed. Is the interest that is now being paid that relates to the note considered investment interest and only deductible 4952/Sch A? Or does it revert to the rental property?

Thanks, Dave

Dennis (talk|edits) said:

2 May 2006
I would assume a change in asset composition would allow a change in allocation.

Treasury Regulations, Subchapter A, Sec. 1.163-8T

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