Passive Losses and moving back into a rental


M

mpeterson890

I moved back into a house I had rented out. I understand that I can now
take my
losses that were not allowed due to high income since the property is no
longer a
rental property. Is that actually the case? Also, if the property is
converted,
is that considered a sale that I will have to calculate capital gains on
since my
adjusted basis is lower from taking depreciation? Or is the sales price
just my
adjusted basis?

-------------------------------------
MEP



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D

D. Stussy

mpeterson890 said:
I moved back into a house I had rented out. I understand that I can now take my
losses that were not allowed due to high income since the property is no longer a
rental property. Is that actually the case? Also, if the property is converted,
is that considered a sale that I will have to calculate capital gains on since my
adjusted basis is lower from taking depreciation? Or is the sales price just my
adjusted basis?
No. Your understanding is incorrect. You may take your carried suspended
losses only when you FULLY DISPOSE of the property. You haven't disposed
of the property by converting it back to personal use. A conversion of use
is not a sale.
 
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G

Gene E. Utterback, EA, RFC, ABA

mpeterson890 said:
I moved back into a house I had rented out. I understand that I can now
take my losses that were not allowed due to high income >since the property
is no longer a rental property. Is that actually the case? Also, if the
property is converted, is that considered a >sale that I will have to
calculate capital gains on since my adjusted basis is lower from taking
depreciation? Or is the sales price >just my adjusted basis?

Your understanding is INCORRECT. Suspended losses get freed up when you
DISPOSE of the property. You have not disposed of the property, you merely
converted it.

Your losses remain suspended until you dispose of it. Read IRS Pub 527 (I
think) for more details.

Gene E. Utterback, EA, RFC, ABA
 

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