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Old 03-04-2015, 12:27 PM
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Sale of former residence turned rental at a loss

We purchased a home in IL in June 2004 - we used it as our primary residence until Nov 2012. From Nov 2012-Jan 3 2014 we had renters and sold the home on Jan 3 2014. The original purchase price of the home was $324,500, the home was sold in 2014 for $294,500 and we had expenses around $29k (taxes, commission, credits, fees, surveys, attorney, interest, etc).

How do I best claim the property (3 days of income $203) vs the losses/expenses incurred. I believe I will need 4797, but how do I determine cost basis and depreciation?

I claimed the rental income in 2012 and 2013 on the 1040E and we currently live in TX - does this make a difference at all to the taxes?

Thanks in advance for any assistance!



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Old 03-05-2015, 02:54 AM
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ello. My husband did our taxes this year and we got our refund already but, he forgot to file my 1099 misc which was about 7000.00 and we got a refund of 4000.00. How much trouble am I in and what do I need to do?======>You mean you forgot to include the income information from the 1099 on your spouse‚Äôs tax return, however,he/you need to amend the return by filing a form 1040X. With a 1040X, you need only make changes to the information you omitted or reported in error and then submit the 1040X to the IRS. You do not have to submit a paper copy of your 1099 to the IRS, but you do have to report the income listed on it.

In general,for a apyer, the 1099-MISC must be filed with the IRS by February 28 on paper, or by April 1 if filed electronically. When the filing deadlines are missed, the IRS charges penalties based on how late the returns are filed. The IRS uses a tiered structure to levy penalties for late filers. The later your 1099-MISC forms are filed, the higher the penalty. If you file your information return within 30 days of the original February 28 due date, a fine of $30 per return must be paid with a maximum fine of $250K per year. If you are later than 30 days but before August 1, you face a penalty of $60 per return and a maximum fine of $500K per year. Filing after August 1 means a $100 per return fine with a $1.5 million maximum. The IRS does cut small businesses some slack by reducing the maximums to $75K, $200Kand $500Kper year when your average annual gross receipts are less than $5 million for the past three tax years.

Sale of former residence turned rental at a loss
We purchased a home in IL in June 2004 - we used it as our primary residence until Nov 2012. From Nov 2012-Jan 3 2014 we had renters and sold the home on Jan 3 2014. The original purchase price of the home was $324,500, the home was sold in 2014 for $294,500 and we had expenses around $29k (taxes, commission, credits, fees, surveys, attorney, interest, etc).

How do I best claim the property (3 days of income $203) vs the losses/expenses incurred. I believe I will need 4797, but how do I determine cost basis and depreciation?====>>Aslongas you rented the home for only 3 days and r ental income was $203 , then, you do not need to report 3 days of incomer $203 AT ALL;as you rentedthe home for fewer than 15 days a year that the rental income is not included in your gross income;however, you can deduct home expenses,i.e., mortgage interest/real estae taxes on Sch A of 1040 aslongas you itemize your deductions; as you disposed of your home at a loss, you do not need to take sec 1250 unrecpatured depre taxed as ordinary gain.
If not(you rented more than 14 days a year) then, you need to file Sch E of 1040 to claim/deduct your rental home related expenses/losses on your return;in this case, unless you are r/e pro, or your income , magi, is small enough that you can use the $25k annual rental loss allowance. then, yur rental losses are always classified as "passive losses" for tax purposes. This greatly limits your ability to deduct them because passive losses can only be used to offset passive income. They can't be deducted from income you earn from a job or investments such as stock , interest income or savings accounts.as you sell the rental at a loss, you can not deduct the remaining passive losses When you decide to sell the property, you can use any previous losses against the gain resulting from the sale. A passive owner does none of the day-to-day management of the property. He simply owns it.

Your expected loss of $59k (also needs to be reduced by depreciation, which is carried over in your suspended losses) on the sale will be treated as an ordinary loss in the year that you sell the property. Carryover losses also will be allowed as a deduction upon the sale as ordinary loss as said if youhave taxable gain from sale.Losses from selling a personal residence are not deductible. You can only claim tax losses for sales of property used for business or investment purposes.

However, as you convert a personal residence into a rental property and then sell it for less than the original cost, the tax basis of the rental property is the lesser of the cost or the value when it is placed in service, plus any improvements, less any depreciation taken. So, if the house declined in value before converting it into a rental property you might not have a tax loss. However, a loss from a decline in value after conversion to a rental, is generally deductible. You need to enter the sale proceeds on line 1 of Form 4797. The proceeds will be reported to you on form 1099-S; report a description of the rental property on line A of Part III, line 19(a) of Form 4797. And you also need to report the loss on part 2 of 4797.


I claimed the rental income in 2012 and 2013 on the 1040E and we currently live in TX - does this make a difference at all to the taxes?=>Correct;



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