Sold a rental property at a loss ...

Discussion in 'Tax' started by nickravo, Dec 24, 2014.

  1. nickravo

    nickravo Guest

    Bought a town hown in 1999 for $265,000, lived in in until 2002, rented it for the next 12 years, sometimes at a small profit, sometimes at small loss, sold it a couple months ago for $165,000. Come tax-season, what will my accountant ask me for, in terms of paperwork, and will this $100,000 paper loss help me tax-wise?
     
    nickravo, Dec 24, 2014
    #1
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  2. nickravo

    MTW Guest

    I think the key issue here will be the value of the home in 2002 when it was converted from personal to rental use. In such a case your loss is limited to the LESSER OF cost or fair market value. In other words, a loss that "accrued" during your period of personal use cannot later be deducted as a rental loss.

    For example, say the value in 2002 was $250,000. Your loss for tax purposes would be $85,000 (ignoring depreciation for simplicity). On the other hand, if the value in 2002 had been $300,000, you loss would still be $100,000.

    So your problem will be to establish the value of the home 12 years ago.

    MTW
     
    MTW, Dec 24, 2014
    #2
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  3. And don't forget that OP should have been depreciating the place for
    the last 12 years, which also reduces any tax loss he may have.
     
    Stuart A. Bronstein, Dec 24, 2014
    #3
  4. nickravo

    nickravo Guest

    As it happened we had an offer for the place @305,000 but decided to turn it into a rental. Broker was pissed. Had to go to court to appease him, etc.

    So is my loss 305K-165K=$140K-depreciation? If so, how is depreciation computed? Or was? Do I need my tax records for all of those years back to 2002? And let; say at the end of the day I have a loss of $50,000, do I get to deduct this 100 percent off earned income or anything else? Limits?
     
    nickravo, Dec 25, 2014
    #4
  5. nickravo

    D. Stussy Guest

    wrote in message
    As it happened we had an offer for the place @305,000 but decided to turn it
    into a rental. Broker was pissed. Had to go to court to appease him, etc.

    So is my loss 305K-165K=$140K-depreciation? If so, how is depreciation
    computed? Or was? Do I need my tax records for all of those years back to
    2002? And let; say at the end of the day I have a loss of $50,000, do I get
    to deduct this 100 percent off earned income or anything else? Limits?
    ===========

    Are you certain you have a loss? You should have been taking depreciation
    since 2002. If you didn't, you have to account for what you should have
    taken. There's also consideration for any suspended passive loss which is
    an issue you didn't raise.

    Since you have a professional on the job already, if he's any good, he
    should know all this already.
     
    D. Stussy, Dec 25, 2014
    #5
  6. nickravo

    nickravo Guest

    I probably won't see him until March, and I wanted to know what he will ask me fore paperwork wise.
     
    nickravo, Dec 26, 2014
    #6
  7. Since the value at the time you started renting it out was higher
    than what you paid, you use your original purchase price to
    determine basis for depreciation. Typically some of that basis is
    applied to the building and some of the underlying land. You can
    only depreciate the building, not the land. Only your accountant
    will know how much has been depreciated each year and over the
    years, though you may be able to figure it out from your last
    year's tax return.

    My guess is that the amount depreciated was somewhere between
    $6,000 and $10,000 each year. If the actual depreciation was at
    the higher side of that range, you may have no technical loss, and
    may even end up with a small taxable gain.
     
    Stuart A. Bronstein, Dec 26, 2014
    #7
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