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Old 03-31-2014, 12:18 PM
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Converting inherited property into rental - deductions before in-service date?

Hello,

I inherited a house in 2012. I own it free and clear, have never used it as a residence, and have intended from day-one to convert it to a rental.

It was pretty run-down and needed quite a bit of work, so most of 2013 was spent making repairs and improvements. I expect the property to be put in service as a rental at some point in 2014.

My question is: can I deduct expenses, such as utilities, minor repairs, etc. on my 2013 tax return, even though the house was never in service as a rental at any time during the tax year? If I cannot, then can the expenses be carried forward and applied to future tax years after the property is placed in service?



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Old 04-01-2014, 01:11 AM
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Join Date: Oct 2010
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Quote:
Originally Posted by sandman87 View Post
Hello,

I inherited a house in 2012. I own it free and clear, have never used it as a residence, and have intended from day-one to convert it to a rental.

It was pretty run-down and needed quite a bit of work, so most of 2013 was spent making repairs and improvements. I expect the property to be put in service as a rental at some point in 2014.

#1;My question is: can I deduct expenses, such as utilities, minor repairs, etc. on my 2013 tax return, even though the house was never in service as a rental at any time during the tax year?


#2;If I cannot, then can the expenses be carried forward and applied to future tax years after the property is placed in service?
#1; I do not think so aslongas it was offered to be rented as rental pty and the property needs to be rented or available for rent to deduct expendses. As the inherited house was repaired with the intention of being a rental but repairs need to be made prior to putting the property up for rent then the mortgage interest during this time period cannot be deducted.for example, if three months goes by before the property is ready for rent and before the owner begins actively looking for tenants then that is three month's worth of mortgage payments that will not be deductible as interest expense on a rental activity.

#2;No; you can deduct rent elated exp in the year incurred. If the IRS examined the return and saw 2013 expenses claimed in 2014 they'd disallow it.



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