“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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