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Old 09-17-2015, 03:58 PM
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Recouping losses when MAGI over 150k

I've owned a rental property since 2005. My MAGI has never allowed me to take any losses so I have a loss carry forward in 2015 of 125k. The depreciation taken on the house is 75k.

If I gift this house to someone, can I now deducted my rental loss carry forward on my 2015 taxes against my ordinary income? If not, when or how can I use this?

Thanks



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Old 09-17-2015, 09:15 PM
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I've owned a rental property since 2005. My MAGI has never allowed me to take any losses so I have a loss carry forward in 2015 of 125k. The depreciation taken on the house is 75k. ==========>>You have a rental loss if all the operating expenses from a rental property you own exceed the annual rent and other money you receive from the property.In reality, over half of the filed Sch E forms reporting rental income and expenses each year show a loss;unless you are a real estate pro, your Rental Losses Are Passive Losses ; real estate pros may deduct any amount of losses from their other non-passive income. 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 or savings accounts. Aslongas you, as Property owner with MAGI of $100K or less,then, you may deduct up to $25K in rental real estate losses per year if you "actively participate" in the rental activity.However, your MAGI is very high,as you said, could not use any of your business losses from our rental houses.
The more you make, the fewer tax breaks you get. But there's more. if you dispose of the rentals to an unrelated person in a transaction that would be fully taxable, the passive activity losses you have in that year and that were carried over from prior years are no longer considered passive activity losses and at that point can offset other income, like wage income.
So, if these properties are not going to turn around quickly, you may want to consider selling them and cutting your losses. By doing that, you also free up those passive activity losses and can get the tax benefit from them.





If I gift this house to someone, can I now deducted my rental loss carry forward on my 2015 taxes against my ordinary income? =========>>>No I do not think so; if you gift the house to someone, then you do not need to recapture sec 1250 depreciation that you took previously; however, you CAN not deduct your rental losses c/f on your 2015 return. By just giving it to someone as a gift,he/she at least receives your remaining basis in the property, and any disallowed PAL loss carryovers Plz,Read above.you, as a donor, will be responsible for filing a gift tax return , form 709 if the fair market value of the gift exceeds the $14k in 2015.

If not, when or how can I use this?=======>>>>as mentioned above.



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Old 09-17-2015, 09:44 PM
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Last questions

Thanks for your help. One last thing I promise.

If I gift the entire house (FMV of 250k) to a non-relative in 2015, I file a gift tax return and since I am not near my lifetime 5.43 million limit there is no tax issue for me on this transaction or on the person I gift the home to correct?

To the person who is gifted the house they also get my 75k rental loss carry forward that is attached to the house? If they have 100k in ordinary income can they use all of the carry forward in 2015 to offset that income?

If the person who is gifted the house then lives in the house as their primary residence for over two years, are they allowed to use the 250k principle residence allowance to offset any gain on the sale in 2018?

Is their basis in the gifted house the FMV of house when gifted to them or the tax basis at time of gift?

Thanks again



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Old 09-18-2015, 12:28 PM
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Quote:
Originally Posted by Azref2627 View Post
Thanks for your help. One last thing I promise.

#1;If I gift the entire house (FMV of 250k) to a non-relative in 2015, I file a gift tax return and since I am not near my lifetime 5.43 million limit there is no tax issue for me on this transaction or on the person I gift the home to correct?

#2:To the person who is gifted the house they also get my 75k rental loss carry forward that is attached to the house? If they have 100k in ordinary income can they use all of the carry forward in 2015 to offset that income?

#3;If the person who is gifted the house then lives in the house as their primary residence for over two years, are they allowed to use the 250k principle residence allowance to offset any gain on the sale in 2018?

#4;Is their basis in the gifted house the FMV of house when gifted to them or the tax basis at time of gift?

Thanks again
#1; Correct no gift tax liability to the IRS? your state ; however, as said, you need to file form 709 just to report the amount of the gift exceeding the annual exemption amt of $14K for 2015.


#2:Correct;no as said the rental losses are passive LOSSSES, NOT ORDINARY LOSSES; the rental losses of $75K can only be used to offset other passive income.


#3;Correct;however, they NEED to convert the rental home as their primary home.

#4;Usually the adjusted basis of the rental home aslongas the FMV is larger than the adjusted basis.I m ean , if the FMV of the rental property at the time of the gift was equal to or greater than the donor's adjusted basis, his basis in the property immediately after the gift will be the same as the donor's, your, adjusted basis at the time he received the gift ;If you, the donor paid any gift tax, he should increase his basis by all or part of the gift tax paid, depending on the date of the gift ;



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Old 09-18-2015, 12:33 PM
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Quote:
Originally Posted by Azref2627 View Post
Thanks for your help. One last thing I promise.

If I gift the entire house (FMV of 250k) to a non-relative in 2015, I file a gift tax return and since I am not near my lifetime 5.43 million limit there is no tax issue for me on this transaction or on the person I gift the home to correct?

To the person who is gifted the house they also get my 75k rental loss carry forward that is attached to the house? If they have 100k in ordinary income can they use all of the carry forward in 2015 to offset that income?

If the person who is gifted the house then lives in the house as their primary residence for over two years, are they allowed to use the 250k principle residence allowance to offset any gain on the sale in 2018?

Is their basis in the gifted house the FMV of house when gifted to them or the tax basis at time of gift?

Thanks again
NOTE;
If the FMV of the property at the time of the gift was less than the donor's adjusted basis, his basis for gain on its sale or other disposition is the same as the donor's adjusted basis, plus or minus any required adjustments to basis during the period you held the property.If the FMV of the property at the time of the gift was less than the donor's adjusted basis, then, his basis for gain on its sale or other disposition is the same as the donor's adjusted basis, plus or minus any required adjustments to basis during the period he held the property.

A different rule applies if you sell gifted property at a loss. If the FMV of the property at the time of the gift was less than the donor's adjusted basis, his basis for loss on its sale or other disposition is its FMV at the time of the gift, plus or minus any required adjustments to basis during the period he held the property. In other words, for purposes of determining losses, he , the done, use the lesser of the donor's adjusted basis or the FMV at the time of the gift as your basis.



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