Discussion:Rental Property convert to residence
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Rental Property convert to residence
Discussion Forum Index --> Tax Questions --> Rental Property convert to residence
| 15 January 2008 | |
| If have Sch E rental property and it is converted to personal residence, does it stay on the books untill I sell the personal residence even if I live in it for 10 years and then do the 4797 or do I take it off the books on a 4797 when converted to personal residence | |
| 15 January 2008 | |
| Hi take it off the books put the depr history somewhere where it wont get lost for depr recapture when he sells it. bye | |
| 15 January 2008 | |
| to take it off the books you have to do a 4797 which is the sale but no sale has occured untill years later when person residence is sold and then they will take the 121 | |
| 15 January 2008 | |
| Hi huh take it off the books means just take it off the tax return you dont have to do a 4797 because it is converted to personal. bye | |
| 15 January 2008 | |
| the problem is that the tax software continues to add depreciation to the tax return becasue it does not n]know not to since it is being used for personal reasons | |
Death&Taxes (talk|edits) said: | 15 January 2008 |
| If you want to leave the depreciation schedules on the return, convert the business percentage to something like .001 [Proseries will not you use 0 percent]....this should result in zero depreciation. Wes' idea of printing out a final depreciation schedule is better....then deleting the forms you no longer use. | |
| 15 January 2008 | |
| My software will let you check 'converted to personal' under disposition of assets and then will not calculate gain or loss. I can actually keep the asset in the program if I think I may convert it to business use again. Or delete it and just keep track of depreciation taken. If it is personal use when sold, then you don't use the 4797, it just goes on the Sch D, and depreciation is recaptured there. For this, my software has a 'sale of personal residence' tab on the D where you can enter any depreciation taken before it was personal use. | |
| 15 January 2008 | |
| Just change the depreciation method to a non-depreciating method (ie.land) and leave on the books. No further depreciation accumulates and you have the records for recapture when it is sold. | |
| 15 January 2008 | |
| Hi sorry let me try again "take it off the books" means DELETE IT from the tax software and print out the last rental depr schedule and save it for the ultimate sale. Or you can leave it in under the various ideas discussed above. Sorry seems like a mountain being made out of a mole hill. :) bye | |
| 4 February 2008 | |
| Does anyone know what happens to the prior year's unallowed passive activity losses (form 8582) when the property is converted from rental to primary residence? | |
| 4 February 2008 | |
| tomzon: Those losses remain suspended until you have a taxable disposal (like kind exchanges do not free up passive losses, for example). Just guessing, but I think the subsequent sale of the residence after it had been converted to personal would allow you to take the unallowed losses because you are paying taxes on the prior depreciation. | |
| 1 March 2008 | |
| I rented my house out for one year while on sabbatical. I claimed depreciation for the fraction of the year in 2006 during the time the house was rented, and now need to claim the remainder of that year for the time the house was rented in 2007. The problem is that my tax preparation software appears to allow only two ways for termination of service/disposal of the property: sale of the property or like-kind exchange, neither being the case at hand. How do I indicate a date at which the property was retired from service, i.e. converted back to personal use, so that the software doesn't assign a full year of depreciation to my form? On what federal form would this be reported and how? Thanks for any help here. | |
| 1 March 2008 | |
| tax software is no substitute for a good tax professional
you might 'ask the box' since you are trying to do it yourself | |
| 3 March 2008 | |
| Kevinh5:I apologize for being naive, but what does 'ask the box' mean? Are you referring to querying the software? I have tried entering all possible forms of my question and still have no answer. My own reasearch has lead to a number of different federal forms dealing with depreciation of property, including 4562,4797,4684 and 8824. However, in reading through these, I see nothing resembling conversion of rental property to personal use, at least in regards to being able to set a date to end depreciation mid year. In the federal publication document # 946, it even states:
You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. You sell or exchange the property.
However, none of the forms mentioned above mentioned anything about retiring property from service by conversion, much less a date. I feel like there is some hide-n-seek going on here. I suppose one could look at this event as a like-kind exchange, where I traded my rental property for a personal residence, but in like-kind exchanges it appears necc. to have some sort or mediator or third party, which is not my case. Am I legally ok if I take a full year of depreciation, instead of the partial year, as long as I keep track of it for future use in the case that I sell my house (for purposes of recapture)? That way I could take the depreciation this year, and then take it off the books for 2008, since I won't be making any entries for rent. Sorry about the length of this response | |
| 3 March 2008 | |
| NO, you can't take depreciation for a period for which it is not available for use in a trade, business, or rental. What professional tax preparers do is to calculate the allowable amount and force the software to only claim that.
"Ask the box" refers to the H&R Block ad poking fun at Turbo Tax users trying to go it alone. | |
