8829 - is depreciation required?

[schirallicpa]

ok - I cannot count the number of times I have taken on a new client who has been taking home office expenses and does not take depreciation on the home. I am then told that they don't want to de-value the home by taking depr on it. But, this was always my understanding - that the business portion of the home is no longer considered "residence" under the home sale exclusion rules, that the business portion is reported on 4797 when sold, and that on the 4797 you have to determine what depreciation would have, could have, should have been regardless of whether the benefit was taken.

Can someone else chime in on their opinion of this for me?

thanks.

[mcb39]

I agree with your analysis. However, there will always be someone who will not take ANY expenses for Business Use of the Home unless you leave the depreciation off. In those cases, I bow to their wishes and leave it off knowing that most of the time they are not going to sell the place anyway and the depreciation per year on an office in home is pretty minimal anyway.

[Lion EA]

The depreciation allowed or allowable cannot be excluded from gain on the sale of a primary residence. If the OIH is within the home, it's just a line on Schedule D. If a separate structure, Form 4797.

[schirallicpa]

Thanks for pointing out Sch D, not 4797.

Have a great weekend (and a productive one, because we all know that this is when we get the most done with no clients hounding us.......;0)

[Lion EA]

But, I have three client appointments today, maybe tomorrow, and at least one pick-up scheduled for Monday. And, multiple phone calls to make asking questions; that means I'll be waiting on and receiving return calls all weekend. A flurry of drop-offs this past week, also, so lots to do. Hubby's now retired and underfoot; I may need to rethink this OIH. I sent him away to son's Inn to play Innkeeper for a few days, but he's back!

[Catherine]

I just got rid of -- oops, I mean, "I just had two client appointments back to back" and hope that from here on in I can get lots of work done. Husband and daughter #2 are home, though, and that means that soon someone will start hounding me about what I am going to make everybody for lunch.... and even if I dump it back on them and retreat to my desk with a bowl of Cheerios, I will have been interrupted. The OIC works great when I am by myself!

[kcjenkins]

But, this was always my understanding - that the business portion of the home is no longer considered "residence" under the home sale exclusion rules, that the business portion is reported on 4797 when sold, and that on the 4797 you have to determine what depreciation would have, could have, should have been regardless of whether the benefit was taken.

Can someone else chime in on their opinion of this for me?

thanks.

That leaves off one very significant detail. IF the office is NOT 'exclusive use', it's not claimed and not depreciated. So it is easy to protect those clients from the problem by simply advising them to use the office at least part time for some personal use, even if that is just putting a TV in there to watch from time to time. Even putting a game on the computer, and playing it there from time to time is enough to make the office no longer exclusive use. They can still deduct all the direct expenses, while not needing to claim any depreciation.