Discussion:Residence converted to rental and sold
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| Revision as of 01:34, 1 January 2009 Kevinh5 (Talk | contribs) ← Previous diff |
Revision as of 01:44, 1 January 2009 TTMM (Talk | contribs) (Dub you also nee) Next diff → |
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| There, that answer didn't evoke any regrets, did it?}} | There, that answer didn't evoke any regrets, did it?}} | ||
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| + | {{ForumReplyPost|UserID=TTMM|Date=1 January 2009|Text=Dub you also need to consider a provision of the Housing Assistance Act that doesn't allow you to use the Section 121 exclusion for all of the gain (if any) if the residence had nonqualifed use after 2009. | ||
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| + | Also when the residence is converted to rental property then it becomes a Section 1250 asset. The loss is ordinary. And the loss would be calculated as Kevnh5 indicated. He wouldn't get the whole loss from when he purchased it until it was sold. }} | ||
Revision as of 01:44, 1 January 2009
Discussion Forum Index --> Advanced Tax Questions --> Residence converted to rental and sold
Discussion Forum Index --> Tax Questions --> Residence converted to rental and sold
| 31 December 2008 | |
| A client purchased a condo to store his furnishings and posessions while employed overseas in 2004. When he returned market conditions were bad so it was converted to a rental. It was personal use for 3 years and rental for 2 years through 2008. If it were sold in 2009, are there restrictions that would prevent him from realizing all of the capital loss? | |
Justin2271 (talk|edits) said: | 31 December 2008 |
| The personal use shouldn't matter. He would have the recapture of depreciation, but the loss should be fully allowed. Granted he would only be allowed to deduct $3,000 of it each year on his 1040 unless he has other capital gains to offset. | |
| 31 December 2008 | |
| Justin, you are forgetting that his basis for loss will be the lower of cost or FMV at date of conversion to business use.
and I also think you are forgetting the fact that the loss from a rental would be ordinary, not capital. | |
| 31 December 2008 | |
| As an aside, Justin, I was just up there in Seattle on Sunday (had been in Victoria BC and Port Angeles WA for the week of Christmas) and went to see the movie Twilight filmed there. What a beautiful part of the country to live in!!!!! | |
| 31 December 2008 | |
| New to this site, and thought this discussion would help with a current issue I have with a client. Am kind of disappointed by the tone of the second to last post . . . I've seen that in a lot of the things I've read here - sarcasm, snottiness, etc., and was just wondering why there's a need for that . . . Seems a little unprofessional to me. | |
Justin2271 (talk|edits) said: | 31 December 2008 |
| Thank you Kevinh5. Although you bring up good points that I had not thought of before writing my initial response. You are entirely correct and thank you for correctly answering the poster's question. | |
| 31 December 2008 | |
| Thank you Justin and Kevin for your input. I did tell the client his loss would be the difference between FMV on 1/1/07, when it was converted to rental, and the sale price.
Just thinking with so many homeowners upside down on mortgages, is it likely we will see thousands of them converted to rentals for a year and then sold so the loss can be realized? | |
| 1 January 2009 | |
| The loss on disposal of rental property is ordinary? Is rental property not a capital asset?
I'm going to regret this post when someone points out the obvious I'm overlooking. | |
| 1 January 2009 | |
| Dub, you are forgetting something important about §1245, §1250, and §1231 in regards to losses.
There, that answer didn't evoke any regrets, did it? | |
| 1 January 2009 | |
| Dub you also need to consider a provision of the Housing Assistance Act that doesn't allow you to use the Section 121 exclusion for all of the gain (if any) if the residence had nonqualifed use after 2009.
Also when the residence is converted to rental property then it becomes a Section 1250 asset. The loss is ordinary. And the loss would be calculated as Kevnh5 indicated. He wouldn't get the whole loss from when he purchased it until it was sold. | |
