Sold a rental property at a loss ...


N

nickravo

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?
 
M

MTW

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?
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
 
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S

Stuart A. Bronstein

MTW said:
(e-mail address removed) wrote:

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.
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.
 
N

nickravo

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.
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?
 
D

D. Stussy

wrote in message
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.
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.
 
N

nickravo

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.
I probably won't see him until March, and I wanted to know what he will ask me fore paperwork wise.
 
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S

Stuart A. Bronstein

I probably won't see him until March, and I wanted to know what
he will ask me fore paperwork wise.
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.
 

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