loss on rental property sold.

  • Thread starter Nick D'Annunzio Jones
  • Start date

N

Nick D'Annunzio Jones

I bought a property in 2000 for $260K; lived in it for one year; have
rented it out and claimed it as a loss or gain as rental income since
then. Now I am selling the home for $160K. Can I take a $100K loss
against earned income? Any other type of income? Hold and roll over
the loss? (And if I move back into the house, how long until it ceases
to be a rental property for tax purposes.)
 
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A

Arthur Kamlet

I bought a property in 2000 for $260K; lived in it for one year; have
rented it out and claimed it as a loss or gain as rental income since
then. Now I am selling the home for $160K. Can I take a $100K loss
against earned income? Any other type of income? Hold and roll over
the loss? (And if I move back into the house, how long until it ceases
to be a rental property for tax purposes.)
You have quite a few years of rental use, and when you sell you will
be recognizing a loss on Form 4797. You will also have less of a loss
because of the amount of depreciation you claimed or should have claimed.


That's business loss, and not capital loss, so you are not going to be
hit by an annual 3000 limit, if that's what you are asking. Although
it's just possible with whatever else is going on there's a net operating
loss, and that could complicate things.

Also in my opinion, Form 4797 is one of the most deeptive form around.
It looks fairly simple, but might just produce a humongous amount of
filing errors, and for that reason I'd recommend you seek professional
assistance for the year of sale. From what you said, it might be best
not to convert it back to personal use at all.
 
B

Bill Brown

You have quite a few years of rental use, and when you sell you will
be recognizing a loss on Form 4797.  You will also have less of a loss
because of the amount of depreciation you claimed or should have claimed.

That's business loss, and not capital loss, so you are not going to be
hit by an annual 3000 limit, if that's what you are asking. Although
it's just possible with whatever else is going on there's a net operating
loss, and that could complicate things.

Also in my opinion, Form 4797 is one of the most deeptive form around.
It looks fairly simple, but might just produce a humongous amount of
filing errors, and for that reason I'd recommend you seek professional
assistance for the year of sale.  From what you said, it might be best
not to convert it back to personal use at all.
The starting number for computing any deductible loss is the lesser of
the acquisition cost or the FMV on the date of conversion to rental
(either one reduced by depreciation taken since then). In other words,
if the property declined in value during the year of personal use,
that decline does not increase a later deductible loss on sale.
 
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A

Arthur Kamlet

The starting number for computing any deductible loss is the lesser of
the acquisition cost or the FMV on the date of conversion to rental
(either one reduced by depreciation taken since then). In other words,
if the property declined in value during the year of personal use,
that decline does not increase a later deductible loss on sale.

And the allowed (which is the allowable, here) depreciation was
based on the same figure.
 

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