Discussion:Depreciation on Rental property with no Income
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Depreciation on Rental property with no Income
Discussion Forum Index --> Tax Questions --> Depreciation on Rental property with no Income
| April 28, 2008 | |
| Client personally owns two buildings. One is rented to her wholly owned C Corp and the other is rented to her kid's wholly owned C Corp (owned 50/50 by brother and sister). Both businesses went through a rough 2007 and were unable to pay rent. My question is this: can the mother still depreciate the buildings even though she did not have any rental income from the two related businesses? | |
| 28 April 2008 | |
| No. She must depreciate. She has no choice. Use it or lose it. | |
| April 28, 2008 | |
| Do you see any gift tax issues? (Giving $5000/month space for kids to use for their business rent free)? | |
RoyDaleOne (talk|edits) said: | 28 April 2008 |
| I though they were behind in the rent. | |
| April 28, 2008 | |
| No, the mother quit charging rent because the businesses couldn't afford it. She may start charging again if business picks up. | |
Corptaxhelp (talk|edits) said: | April 28, 2008 |
| I'd rather Mom keep the meter running on the rent. Either she's going to get it all back some day or the kids' companies are going to go bankrupt. Don't miss the opportunity to put a loss on Mom's books. | |
| April 28, 2008 | |
| I will take the loss if I can be convinced there are no problems taking a loss when no income is reported. If the meter was still running, I'd have no problem taking the loss. However, if Mom is "giving" the rental space to her kid's business, then I'm concerned about her taking the loss when it is no longer a "rental property" in the true definition of the word. Also, I'm concerned about gift tax reporting issues. | |
| 28 April 2008 | |
| I THOUGHT THIS HAS TO DO WITH RELATED PARTY TRANSACTION IN WHICH ONE CAN NOT DEDUCT LOSSES. | |
| 28 April 2008 | |
| WAKAYO,
No reason to shout. All caps is considered shouting and rude. Also, you need to complete a profile. What you refer to mostly relates to sales or exchanges. Section 267(a)(1) states "No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or indirectly, between persons specified in any of the paragraphs of subsection (b)." Subsection (b) spells out the relationships. If BEGooding's client dots all their i's and crosses all their t's, they can pass muster with related party transactions. I've seen it before where as long as the documentation supports the transaction and uses reasonable market data, everything is fine. Tom | |
