Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-28-2011, 01:06 PM
Junior Member
 
Join Date: Mar 2011
Posts: 2
Convert personal to rental to personal

July 2003, I purchased a home for $121,900. October 2003, I relocated with my job. I continued to rent the home until July 2010. My job relocated me back to the area. I moved back into the home July 2010.

I am estimating $30,000 in depreciation and have a carryforward of passive losses of $18,000. I would then estimate by basis at $109,900.

I understand you have to live in your home 2 of 5 years to consider it primary residence and exclude from capital gain. However, what if I am in a loss position? Let’s estimate that I sell the house for $100,000 and show a loss of $9,900. I know you can’t deduct a loss on home for your primary residence. However, what if I sell the home prior to the 2 years that would make it my primary residence for tax purposes (exclude gain)? Can I deduct the $9,900 if I sell the home in 2011 or would I have had to sell the home in 2010 to be able to write off the loss? Or should I have not moved into the home at all in 2010 in order to write off the loss?

I have researched all over the internet and keep reading about my example but it explains what happens in a gain and not a loss. With the housing market downturn, these cases should start appearing similar to mine?

Thank you



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 05-01-2011, 08:54 PM
Junior Member
 
Join Date: Mar 2011
Posts: 2
Any help on this? I have researched everywhere and can't find my situation out there?



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 05-02-2011, 05:47 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,236
“However, what if I am in a loss position? Let’s estimate that I sell the house for $100,000 and show a loss of $9,900. I know you can’t deduct a loss on home for your primary residence.”--->Correct; you cannot deduct a loss from the sale of your main home. It is still a personal loss because the property is not a rental any more. However, as you can see, the depreciation deduction, $30,000, might be large enough, I guess, to exceed the property's rental income, and you could use it to offset your rental income and therein reduce your tax liabilities as well. Also, the property is not even subject to deprecation recapture rule since it is sold in loss( as the adjusted basis for the property is lower than it s FMV). If you sell the property converted from a rental into your personal residence in gain, then the amount of depreciation, $30,000, you deducted after May 1997 will be taxed at the special 25 percent federal depreciation recapture tax rate UNDER the SEC 1250 depreciation recapture rule.
“However, what if I sell the home prior to the 2 years that would make it my primary residence for tax purposes (exclude gain)? Can I deduct the $9,900 if I sell the home in 2011 or would I have had to sell the home in 2010 to be able to write off the loss?”---->As said above, when selling a rental house at a loss, the loss may actually turn out to be smaller than you’d expect; while you were renting it out, you were most likely depreciating the cost of the house,$30,000, on Schedule E. When you sell the house, your cost basis in the house is reduced by the amount of depreciation you’ve taken, which makes for a smaller loss. Your loss from the sale of a rental property is tax deductible as an ordinary loss. Ordinary losses are deductible in full against your ordinary income (like your wages and interest you earn).
“ Or should I have not moved into the home at all in 2010 in order to write off the loss?”---->I guess once you move into your home, then it becomes your regular primary home, NOT rental property any longer and the rule, aas said above, applies to your property as your primary home.



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
  #4 (permalink)  
Old 08-25-2011, 04:34 PM
Junior Member
 
Join Date: Aug 2011
Location: San Francisco
Posts: 2
Timing

>I guess once you move into your home, then it becomes your regular primary home, NOT rental property any longer and the rule, aas said above, applies to your property as your primary home.

I don't think this is true. There has to be a time limit for something to be considered a primary house vs. a rental house. There is when you go from a primary to a rental, so I think there should be something similar when going from a rental to a primary. The 2 of last 5 years rule probably applies, if only in a prorated manner.



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
  #5 (permalink)  
Old 08-25-2011, 04:36 PM
Junior Member
 
Join Date: Aug 2011
Location: San Francisco
Posts: 2
Drew

Have you been able to get any other other answers - other than those posted here? I would just call the IRS or read up on irs.gov.



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
Ads
Reply


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
Sale of Rental property formerly used as personal residence Kato Rental Real-Estate 2 03-19-2011 03:02 AM
Personal Use on Schedule E Jimbo_08 Rental Real-Estate 2 02-23-2011 10:28 AM
Increase Personal Tax Exemption? UrbanGuySF Miscellaneous 0 05-19-2010 11:57 AM
Personal use of corporate vehicle ubspromo S-Corporation 1 01-19-2008 04:42 PM
What are Personal Service Corporations? TaxGuru C-Corporation 0 12-09-2007 04:09 PM

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

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