Advice Requested

[Janitor Bob]

Client Inherited a mobile home and lot.....Invested some money into repairs and utilities with intention of renting it to someone. However, my client soon realized that the mobile home was in too bad of shape to repair sufficiently to rent out...so she had it sold for scrap value. Can she possibly claim the $900.00 in repairs and $250.00 in utilities as rental expenses? She never actually rented it to anybody, but that was here intention when paying these expenses.

[kcjenkins]

I think I would add those expenses to her basis, and show the sale, rather than try that, JB. Because to be rental property, it has to at least be in good enough shape to rent, and since it never got to that level, even if you set it up as a rental, those costs to get it to rentable shape would need to be capitalized.

[Janitor Bob]

I think I would add those expenses to her basis, and show the sale, rather than try that, JB. Because to be rental property, it has to at least be in good enough shape to rent, and since it never got to that level, even if you set it up as a rental, those costs to get it to rentable shape would need to be capitalized.

Thanks....Now I find our that she did not really sell it....She inherited it in January.....never gor any appraisal or value estimate.....put money into repairs and paid utilities for 7 months. Then in August, the mobile home park informed her that it was too old and still not in good enough condition....they gave her two choices....pull it out of the park (would have cost her approx. $5,000) or simply let the park have it...she just walked away and let the park have it.

So I am, not sure what I would use as a basis ...nor do I have a selling amount....How would you handle?

[jainen]

>>the mobile home park informed her that it was too old<<

It would seem she never could have had a realistic expectation of renting it. And honestly, a thousand bucks wouldn't be enough for more than cleanup and minor cosmetic repairs. Since it obviously had only a de minimus FMV and she failed to establish a basis anyway, I don't think she has anything to report on her tax return.

[Janitor Bob]

>>the mobile home park informed her that it was too old<<

It would seem she never could have had a realistic expectation of renting it. And honestly, a thousand bucks wouldn't be enough for more than cleanup and minor cosmetic repairs. Since it obviously had only a de minimus FMV and she failed to establish a basis anyway, I don't think she has anything to report on her tax return.

This is almost exactly what I told her...but she requested that I get some opinions from fellow preparers.

[jainen]

>>opinions from fellow preparers<<

I'm not clear if you are seeking more than one opinion per fellow. To be safe, I'll give you another which you may ignore if I have exceeded my limit.

Although it is an election year so everybody of course is very expressive that government handouts are bad, it is my observation that privately everyone wants as much as they can finagle from the public purse. If your client is of that preference, I would not feel uncomfortable allowing the $900 as the tax basis for the abandoned property. That number would not be too hard to defend either as FMV or as additional capital investment. (I admit this is merely a variation of kc's opinion, but I didn't want to put much effort into a new idea that I already told you to ignore.)