Originally Posted by rdh2
#1;House bought in 2006 and used as primary residence. Converted to rental in August 2012, due to job transfer.
I established FMV of home for tax purposes and 2012 taxes were filed and depreciation taken for house and appliances.
#2;Due to non paying tenants, I went delinquent on mortgage. Bank agreed to deed-in-lieu of foreclosure. Process completed 12/26/2013. Received 1099-A from bank showing sales price as the remaining mortgage amount due. The FMV on the 1099-A was about $2000 higher than the sales price, so there is no issue with taxable cancelled debt.
I have completed the entries for income and expenses (Sch E), and depreciation (form 4562) for this tax year.
Now I am entering the information for form 4797, part III. I am entering information separately for house, land, and appliances. I am using the basis, depreciation allowed, and sales price from 1099-A.
1. The appliances went with the house. Do I state the sales price was zero for their disposal? If not, how is it recorded?
#4;2. How do I exempt the gain shown for the house and land (since it was primary residence)?
#5;The calculation on the 4797 shows the gain to be the depreciation + the amount of sale over the basis. I know I will have to pay taxes on the depreciation claimed for 2012 and 2013. I just can't figure out where to exempt the gain resulting from the sales price minus the basis.
I'm sure I will have more questions. Thanks in advance for any help.
#1; aslongas you purchase the appliances for your rental property, thety can be depreciated for five years. You begin depreciating in the year in which the appliances were purchased and placed in service. Your purchase price in the beginning year is your cost basis. You are allowed to depreciate the full cost of the appliances in the five years you have them in service at your rental property;in the case of used appliances , they can be depreciated the same way as new appliances. Your cost basis is what you paid for it, not what it was worth new. You still get five years to depreciate it, until you recover the purchase price fully. If you purchase them and take them out of service in the same year, you cannot depreciate it. In such a case, you would write them off as an expense for the current year.
#2;foreclosed primary-residence homeowners are exempt from declaring as income the difference between the outstanding loan balance and the subsequent sale price. The same is not true for foreclosed rental properties, whose owners may have to report the difference in those values as a capital gain. The 1099-A is issued by the lender and will show the loan balance and the subsequent sales price of the foreclosed home. As mentinoned previously, The Mortgage Debt Relief Act generally exempts any cancelled or forgiven debt on a principal residence from consideration as income, up to a maximum of $2 million. The same exemption doesn't apply to investment properties, except under special circumstances, including bankruptcy or insolvency. You may be liable for capital gains tax on the difference between the loan balance and the eventual sale price of the home; both values are shown on Form 1099-A.
#3;I guess you need to recapture the unrecaptured depre taken on the rental pty up to the amount of your LTCG , $2K,shown on 1099A since you have LTCG.
#4;as said, foreclosed primary-residence homeowners are exempt from declaring as income the difference between the outstanding loan balance and the subsequent sale price. The same is not true for foreclosed rental properties, whose owners may have to report the difference in those values as a capital gain..
#5;As mentioned above; Correct;9i guess aslongas you have gain of $2K and the gain’d be taxed as ordinary gain taxed at 25% aslongas your marginal tax rate is 25% or higher.You need to recapture the unrecapture sec 1250 gain LESS you have NOL/PAL c/f bigger than the gain of $2K.