Discussion:Rental house converted to personel converted to rental
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Discussion Forum Index --> Tax Questions --> Rental house converted to personel converted to rental
Marty's mobile tax (talk|edits) said: | 31 March 2008 |
Marty's mobile tax (talk|edits) said: | 31 March 2008 |
| This is the situation. Client rents house for several years than moves into house May 2005. He lives there until Oct. 2007 and then converts house back to rental in Nov. 2007. Publication 527 p. 6 touches on similar situation but not quite the same scenario. My question is this: Should we treat the house as a new rental starting Nov. 2007 or do we just continue the depreciation as we would have but just skip 2006. Thanks. | |
| 31 March 2008 | |
| Good question. Adjusted basis would remain the same. However, I believe you could skip 2006 because nature of property changed. | |
| March 31, 2008 | |
| A twist to consider - and I don't know the answer....what if the value has declined?
Do we now have to look at FMV rather than the purchase price? Very conceivable possibility given the current real estate market IF the house was purchased in 2005. Why does this stuff come up this late in the season? | |
| 31 March 2008 | |
| Hi,
Prepare schedule E for rental income earned in Nov & Dec.07 and charge depreciation on property for two months. Thanks. | |
| 31 March 2008 | |
| Puru,
We've asked and asked and asked. COMPLETE A PROFILE! Tom | |
| 31 March 2008 | |
| I do believe when converting rental real estate, you have to use the change in use rules. In 2005, he would have had to report a depreciation recapture and adjust the basis. In 2007, he would use the Lesser of the FMV or adjusted basis of the property(Belle may be right in FMV may be lower). This amount he would depreciate at 27.5 years, SL, MM convention based on the date made available for rent. Take the number of days available for rental/365 x full year property expenses (unless 100% allocable to rental i.e. advertising), these are deducible on schedule E. The balance of Interest and Property taxes are deductible on A. | |
Marty's mobile tax (talk|edits) said: | 1 April 2008 |
| Thanks for the feedback. Things get a bit more complicated in the fact that the client has been doing taxes on TurboTax and never claimed deprciation. She did some more funky stuff that I am still trying to sort out. | |
Marty's mobile tax (talk|edits) said: | 7 April 2008 |
| Thanks for the advice. | |
