Discussion:Vacant Rental Property
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Discussion Forum Index --> Advanced Tax Questions --> Vacant Rental Property
Discussion Forum Index --> Tax Questions --> Vacant Rental Property
| 22 January 2009 | |
| Property was a residence for 2 years but the status changed in Jan 2008, when it became available for rent. Market dried up and the home has not been rented yet. Client has documentation showing good faith effort to rent the property. Does there have to be rental income before the property is viewed as a rental? How should this be handled? If the home is sold in 2009 without getting a renter, will it be considered a rental? | |
| 22 January 2009 | |
| If no depreciation has been taken or a return has not been filed with the Sch E attached then what would be the purpose of filing Sch E. Improvement expenses should be added to the basis...repair expenses are non-deductible as are all other expenses that would not go on Sch A. taxea | |
| 22 January 2009 | |
| I might be missing something but I'm not sure why Taxea considers the repair expenses to be nondeductible. I'm not saying you're wrong. I just don't understand your answer. Is it because of the possibility that the home might be sold in 2009 never having been rented? I know it's tacky to cite an IRS publication. Nevertheless, IRS Pub 527 on pg 3 under Pre-Rental Expenses permits upkeep and ownership expenses once the property is made available for rental, and pre-rental depreciation is also discussed on that page. It's very late, I'm very tired, and I might be missing something that you picked up on. If you get a chance to clue me in, please do. I'm thinking it might have something to do with the possibility of sale in 2009. Thanks. | |
| 22 January 2009 | |
| I see no reason why the the expenses of the rental would be nondeductible if the taxpayers are making an effort to rent the property. | |
Death&Taxes (talk|edits) said: | 22 January 2009 |
| Do we assume the client is not living there? The question does not really say that but says its status changed when it became available for rent. If they moved out, and the attempt to rent was more than a sign in the window for passersby to see, I would agree that the expenses are deductible.
Since they met the two year rule, if sold in 2009, gain would be protected by Sec 121, but if they held it two years, I suspect they bought it at the top of the market and think renting it will permit them to claim the loss....not realizing its basis for rental is FMV on the date converted, not its original cost. | |
| 22 January 2009 | |
| Yes, the client moved out in Dec 2007. Based on the FMV on Jan 1, 2008, if the house is sold in 2009, it would sell at a loss so they want to deduct the loss since they tried to rent the property throughout the year through newspaper ads, sign on the street, neighborhood billboards etc., My confusion lies with whether there is a rule that there must be rental income in order to qualify as a rental and 1) take the normal rental expenses and 2) take the loss in the event the home is sold. | |
| 22 January 2009 | |
| Gcricket - Just make sure you can back up the FMV and the attempt to rent the property out and you should be OK. Since you are trying to take the loss, I would make sure that the attempt to rent is more than just a one week advertisement but is actually substantial. | |
Death&Taxes (talk|edits) said: | 22 January 2009 |
| It would help if they had a roster by name and address of those who saw the house. | |
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