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Old 04-06-2011, 05:18 PM
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Rental on vacant land is less than property tax

I have a 1/4 share in inherited vacant land out of state. The taxes on the property exceed the rental income. My co-owners are showing the net loss as property tax (rental income minus tax) on their Schedule A. From what I can determine, since rental income is involved, even though there is a loss, I am compelled to use Schedule E and cannot deduct the loss either in item 17 of the 1040 or as part of my itemized deductions on Schedule A. If the property is ever sold, my thinking is that I can factor in the yearly losses to determine the profit on the sale. Please help as this has me totally confused. Many thanks.



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Old 04-07-2011, 02:42 AM
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“My co-owners are showing the net loss as property tax (rental income minus tax) on their Schedule A. From what I can determine, since rental income is involved, even though there is a loss, I am compelled to use Schedule E and cannot deduct the loss either in item 17 of the 1040 or as part of my itemized deductions on Schedule A.”--->I guess you need to use Sch E, Form 1040 to report income and expenses from the vacant land rental activities on 1040 line 17; if your losses are limited under a certain situation,i.e., your agi is over $100,000 or etc, then you must complete Form 8582. The allowed loss, if any, shown on the bottom of Form 8582 is transferred to Line 23 of Schedule E.
“ If the property is ever sold, my thinking is that I can factor in the yearly losses to determine the profit on the sale.”--->I guess so; your gain is determined by subtracting from your sale price, your basis (the ¼ of the FMV of the inherited land as long as you inherited the land from a decedent who died before 2010), and also subtract your expenses of the sale.Then you need to use 1040 Schedule D.If you owned the land for more than 1 year, your gain will subject to the more favorable Long Term Capital Gains Tax rates.If your marginal tax rate is less than 15% for 2010, then you do not pay any CG tax on your LTCG.
Please visit the IRS Website see here; Ten Important Facts About Capital Gains and Losses
Capital gains tax in the United States - Wikipedia, the free encyclopedia



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