Residence converted to rental

[Janitor Bob]

client moved out of their primary residence on 09/30/10 and into a 2nd home. They immediately converted the previous residence to rental. Tennant moved in the next day (10/01/10).

They have rental income and some expenses such as 3 months of property tax, 3 months of insurance, and repairs and supplies.

Do I handle this any differently because it was client's residence for the first 9 months?

[BulldogTom]

No different than any other rental. Just make sure you get your basis information and the date placed in service correct for the depreciation. Make sure there was no office in the home in the past where depreciation was taken.

Tom

Lodi, CA

[Pacun]

client moved out of their primary residence on 09/30/10 and into a 2nd home. They immediately converted the previous residence to rental. Tennant moved in the next day (10/01/10).

They have rental income and some expenses such as 3 months of property tax, 3 months of insurance, and repairs and supplies.

Do I handle this any differently because it was client's residence for the first 9 months?

Not really... business as usual. Open Sch E and link an asset entry. Enter the FMV or basis (whichever is lower) at the time of conversion (minus land) and enter the date of placed in service as 10/1/2010 using 27.5 years for rental property.

3 months of property tax, 3 months of insurance, 3 months RE interest... is correct. Expenses and repairs should be 100% or 0% depending on what quarter of 2010 happened.

[Janitor Bob]

No different than any other rental. Just make sure you get your basis information and the date placed in service correct for the depreciation. Make sure there was no office in the home in the past where depreciation was taken.

Tom

Lodi, CA

Thanks! I have done their taxes for many years, so I know there was no OIH.....However, I will need to talk to client and get the basis for depreciation.

[mcb39]

Thanks! I have done their taxes for many years, so I know there was no OIH.....However, I will need to talk to client and get the basis for depreciation.

I had one identical to that which I worked on today. I used the FMV of just the house from the property tax bill. Only difference is that mine was a duplex and one half has always been a rental and they lived in the other half.