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Old 03-11-2016, 03:00 PM
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Sale of Rental Property


I have a tricky rental property question. Here are the details of the transaction:

Originally purchased home on 1/25/08 for $89,900
Converted to rental property on 8/1/13; FMV ~$93,000 and cost basis $89,900 (used $89,900 cost basis for depreciable basis; no improvements to home to increase basis)
Passive rental losses of $800 for 2013
Passive rental losses of $5,788 for 2014 (includes period of vacancy; see below)
Listed house for sale 3/20/14 (not sold until 3/30/15)
Rented home until 7/31/14
Pending sale 12/31/14
House was vacant and listed for sale 8/1/14 to 3/30/15
Sold home 3/30/15 for $89,000; selling expenses of $7,249; Total depreciation taken $5,176

Here are my questions:

1) Can I deduct rental expenses (including depreciation) for the period the home sat vacant from 8/1/14 until the pending sale at 12/31/14? IRS guidelines per publication 527 say you can't deduct vacant home expenses unless it was advertised for rent, but if it wasn't advertised, but available to rent until the pending sale, are those expenses typically deductible?

2) What losses (if any) are deductible in 2015? I think, at a minimum the passive activity losses of $6,588 are deductible.

3) Does the sale of the house go on form 4797 as a sale of a business asset or since it was occupied as a main residence 2 of the last 5 years this would be N/A. In fact, nothing on the sale would be reportable since it was sold at a loss and would not be considered a business asset at the time of the sale. In short, what is the treatment of the house when it was vacant 8/1/14 to 3/30/15?

4) Any other considerations?

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