Welcome Guest. Register Now!  

LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-05-2016, 03:43 PM
Junior Member
Join Date: Mar 2016
Posts: 1
rental property investment loss

Hello, I have 3 business/jobs
one is a regular w-2 employee
one is a small catering business
one is a rental property (paper loss is about 2K a year)
I make less than 100K all together

I tried last year to expand my rental property business by adding another home. The plan was to fix it up and convert it into two units. The selling bank had some problems and the deal didn't go through after a great deal of work on my end. All in all, I lost about 6K on the whole deal. Is there a way to write any of this loss off? I don't think its a capital loss and I am not sure how this can be framed as a passive activity loss. any help, thanks!

Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-05-2016, 04:21 PM
Join Date: Oct 2010
Posts: 5,249
I guess it depends; In general, though, you flip a house for extra money while working at another job, the IRS will probably see the flip as an investment. When it's an investment, you can deduct a maximum of $3Ka year in losses. If your loss is greater than that, you can spread it out over several years, but each year's deduction is limited to $3K. But if you flip several houses at a time, or aslongas flipping takes up the bulk of your time, or if flipping produces most of your income, it's probably a business. as your flip goes sour and you wind up losing money, of course, there's an advantage to flipping as a business rather than as an investment. When it's a business, you can use your net loss to offset other income on your tax return.

Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 03-05-2016, 06:00 PM
Join Date: Oct 2010
Posts: 5,249
Bought primary home 2008 for $170,000 (improvements $30,000)
a. Used one room as home office in 2010,2011,2012 (took total of $647.94 depreciation (cost basis was $8537.97, method SL,Recovery period 39))
b. Rented out room in all of 2012 and 5 months of 2013 (didnt take depreciation)

2.In November 2013 moved and rented the whole house from 12/2013 to 6/2015 (took $6967 deprecation cost basis was $121,010 method SL,Recovery period 27.5))

3. Sold it in 7/2015 for $204,000 (Selling cost of $16,000).

I am confused on how to report this on form 4797.Do i report it in part I because it is a loss and divide it between land and building?====>>in general,You need to report unrecaptured sec 1250 depreciation on form 4797 part I and transfers it to sch D of 1040; section 1250 depreciation recapture differs in that the maximum tax rate that applies is currently 25 %.however as you took a loss, you need to report sec 1250 depreciation recapture on f 4797 part 2 and f1040 line 14 .Your basis for gain/loss is the lower of the original basis or the FMV at the time of the conversion to the rental.you also need to tsubtract out the accumulated depreciation from this value and to add in selling expenses and improvements. say you purchased your home for $300K You spent another $50K on improvements. So, your so called adj tax basis would $350K. At the time of conversion, your homeFMV is $250K. Eventually, you sell your newly converted rental property for $200K after taking $15Kin depreciation write offs during the rental period.So,you incurred losses. Your usual tax basis would be $350K But, because of the conversion, your tax basis is the lesser of either $350K (the purchase price PLUS Improvement costs) or $250K (FMV on the date of conversion). So, your tax basis for losses would be $250K. However, you also took advantage of depreciation deductions in the amount of $15K. So, your losses would be $250K (the tax loss basis with depreciation)-$200K (the sale amount)-$15K (depreciation deduction)=$35K.

correct as you sadi, as land is not depreciable , you must divide it between land and building.just for reference, this is not your case; however, there are tax benefits for selling a primary residence that won't be available on a long-term rental property. When selling your converted rental property, you lose the home sale exclusion. In 2015, the first $250k for single, or $500k of gain for married filing jointly is excluded from taxable income for the sale of a primary personal residence you've lived in for at least the last 2 of 5 years. Rental property is income-producing property and as such, considered business property. You need to report the loss on the sale of rental property on Form 4797, you need to transfer the loss as ordinary loss to line 14 of Form 1040.

What dates do I use for date acquired? =======>>>for gain/loss purposes, it is 12/2013.

Or do I need to report the land section in part I of 4797 and building in part III line 19. ======>correct;the land sale results in a capital gain/or loss. The building sale results in a section 1231 gain or loss. As you owned the property for more than a year before selling it, you must separate the sale of the b/d from the sale of the land. The sale of the land is noted in Part I, and you enter the sale of the structure there as well as you have a loss.
Also do I put down section 121 exclusion in part I of 4797 line 2 where land is because it wasn't depreciated and there was a gain.====>>I do not think so; as said, as the property was also used as rental property, you may be eligible for your primary residence exclusion by completing a 1031 exchange to defer the rest of the gain. A 1031 exchange is allowed under section 1031 and defers gain on the sale and subsequent purchase of property held for business use or for investment

Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Can a LLC equity partner in an investment/rental property deduct travel to inspect/maintain property? StageFourLLC Rental Real-Estate 0 03-12-2014 09:06 PM
Cost basis of rental house converted from investment property Sammie Rental Real-Estate 3 09-05-2013 10:04 PM
Total loss-selling rental property angrywoman Rental Real-Estate 4 12-29-2012 01:16 AM
How to treat sale of Investment real estate converted from Rental Property. Chas002 Rental Real-Estate 1 10-13-2012 05:23 AM
Deduction of Loss from Investment Property CAScott Capital Gains 1 04-19-2012 04:33 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 » Income
 » IRA/Sep
 » Medical
 » Payroll
Forum for CPAs
Financial Planning