Discussion:Real Estate Loss
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| + | can refer to it for his tax file for this client? | ||
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| + | Thank you for your time.}} | ||
Revision as of 21:12, 23 July 2008
Discussion Forum Index --> Tax Questions --> Real Estate Loss
| 29 May 2006 | |
| Bought new construction real estate investment property in Florida with intention of selling right away at a small profit. New house is vacant and market has dried up for now. Since mortgage and other carrying costs are too high to keep, I want to sell at a loss. Can I deduct this short-term loss as Section 1250 (Form 4797)? Can this loss offset other Sch D stock sale gains? | |
| 29 May 2006 | |
| When did you purchase the property and when do you anticipate selling it? Section 1250 only applies if you have taken depreciation, have you taken any? Have you ever rented the property? No matter when you purchased or when you sell, as long as you have not rented the property all of the loss on sale will be a capital loss, short-term or long-term depending on purchase/sale dates and will be treated the same as other capital losses. | |
Sierrafc.com (talk|edits) said: | 29 May 2006 |
| There is no recapture of section 1250 depreciation on rental real estate.
Ron | |
| 30 May 2006 | |
| In most cases that is true, I stand corrected. Exception might be Liberty Zone related. | |
| 31 May 2006 | |
| Thanks for the info. I closed two weeks ago and will sell as soon as an acceptable offer is received. Hopefully, very, very soon. But will be a loss based on fact that new gated community still has other new constructions in inventory. At time of sale, house will not have been lived in, nor rented. Thus, no depreciation.
Will have expenses for utilities, water sprinkler system, insurance, community dues, etc. So can probably claim those on Schedule E as home is listed with Realtor for sale or rent. Thanks again for your replies. | |
| 28 June 2006 | |
| I have recently settled on a property that I will certainly take a loss on. Northern Virginia market has dried up and this development of 400+ units has so many investors trying to unload their properties that it's not will I loose but how MUCH will I loose. Hoping to find that my loss can be claimed on Federal Taxes for some benefit there at least! NO WAY I can sell for what I settled for less than 30 days ago! Competitive market mandates using a real estate agent and that commission is the nail in the coffin! Any suggestions on how to minimize the net loss?????? | |
Mtmckeecpa (talk|edits) said: | 28 June 2006 |
| Fred,
A client of mine is in the same situation as you, bought with the intention of immediately selling and making $50k,no intention of renting, however, now the property is both for sale and rent at the same time. I told him in my opinion Schedule E starts ONLY when he has a tenant, up to that time, everything goes to basis of the property. Others out there will disagree but this is how I would handle it. | |
| 30 June 2006 | |
| I'm one of those who would disagree. If someone is holding a piece of property out for rent, expenses they pay for it while it is vacant should not be capitalized - they are current costs that produce no future benefit. The applicable code sec is IRC 280A - the interest and taxes would be deductible on the property in the current year. Any additional expenses - utilities, condo fees, etc. will have to be carried forward, since they aren't allowed to generate a loss. And the other concern is depreciation - "allowable versus allowed". While a lot of people might not worry about it, the code states that basis MUST be adjusted for depreciation, whether or not actually taken - always a concern in case IRS ever comes in. I wouldn't shy away from picking up expenses even with the lack of a tenant. | |
| 30 June 2006 | |
| Let me adjust my thinking on that a little - 280A is really only if taxpayer uses it as vacation home for part of the year. | |
| 23 July 2008 | |
| Different situation: T/P forms LLC, reports as SMLC starting with 2004. Determined to be a real estate professional, and in 2007 incurs 60k of consulting/travel/seminar expenses. Only Income in 2007, was selling Investment Real Estate Property and rental income which was reported on 4797 and Sec E respectively. In 2004 - 2006 had accumulated losses of 3k on Sch C and no revenus reported.
The 60k does not relate to R/E property purchased and sold in 2007 but rather costs looking at various properties located out of his state. Q1: Assuming these are legitimate expenses, would you deduct them on his Sch C or would you capitalize them and assign them to his next R/E purchase which he will be completing in 2008?
years or as long as you can provide support inform IRS this is an ongoing concern therefore the expenses should be
takened.
Comments/suggestions? | |
| 23 July 2008 | |
| Thank you Kevin for your prompt reply. Is there a code section or ruling which I could direct my associate to so he
can refer to it for his tax file for this client? Thank you for your time. | |
