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Old 03-31-2014, 12:43 PM
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Sale of home previously used as rental property

Hello:

I bought a home in Boston in early 2010 and lived in it until the end of 2011 when I relocated and rented it for a year. The lease ended at the end of 2012, when I put it on the market and sold it on March 15, 2013.

I have the following questions:

(1) how do I treat the period between the end of the lease on December 31, 2012 (when it ceased to be used as a rental property) and March 15, 2013 when the sale was closed? Should I (a) treat the property as an investment property until the date of sale and complete a Schedule E for the 2 and a half month period at the start of 2013, or (b) treat the property as changing back to a non rental property on January 1, 2013 and deduct the mortgage interest, etc on Schedule A for 2013 (since the property was unoccupied for that period and not available for lease)?

(2) In completing form 4562 for 2012, I used an estimated figure for the FMV of the building itself (and not the land) as the basis of depreciation. This is based on the guidance given in publication 946, which states that land should not be treated as a depreciable asset. Is this the correct approach?

(3) In calculating the capital gain/loss on the property during the time it was used for rental purposes, is it correct to use a cost basis of the building plus land instead of just the building? This would (obviously) be different than the basis used for depreciation purposes.

(4) Which IRS form should I use to calculate and report the gain on the property during its use as a rental property?

Thanks in advance,

mvt926



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