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Old 04-05-2013, 10:40 AM
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Son living in home - not for profit rental?

My husband and I purchased another home in Florida in August. Our first home in Fort Lauderdale is not worth what we paid and we cannot sell it. Our son was going to school at the time and couldn't move to the other side of the state, so he is staying in the house. All of the utilities are in my husband's name...our son "occassionally" pays us board when he can, but it barely covers the utilities. The tax person we took our taxes to is saying we must claim it as a not for profit rental. Is this true?



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Old 04-05-2013, 11:23 AM
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“All of the utilities are in my husband's name...our son "occassionally" pays us board when he can, but it barely covers the utilities. “===========If you rent a home to a person below fair market rent. there may be a gift tax issue. For example, if the fair market rent is $1.5K a month and you rent it to your son for $200 a month. The $1.3K a month is a gift each month. With 12 months in a year, the total $15.6K would be over the annual gift exclusion of $13K for 2012($26K for both of you and your spouse);the amount that is annually exempted from federal gift taxes. Only one of you needs to file Form 709. The annual exclusion of $13K is for all gifts in a calendar year to any one individual.
“The tax person we took our taxes to is saying we must claim it as a not for profit rental. Is this true?+=======IRS Pub535 states, QUOTE,” If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. “From your question, it appears that you did not convert your primary residence to a rental, you just rented it out to your son. All the complicated stuff about depreciation, taxes, and prorating expenses is not applicable. You cn report the rental income on Line 21 Other Income on your 1040. Take your usual mortgage interest and real estate tax deductions on Sch A.I guess you can contact IRS for more info in detail.
Index of /pub/irs-pdf...



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