Home/personal/rental/investment

[michaelmars]

Interesting situation:

taxpayer lived in co-op for 5 years, then rented it for about 5 years, then their mother lived in it and it was treated as a 2nd home for about 5 years. Mom dies and the apartment is vacant for a year or so while trying to sell it. Should carrying costs be treated as investment expense and added to cost basis from the time Mom died to the sale?

[OldJack]

No. Carrying cost was on a 2nd home status.

[michaelmars]

I tend to agree but what if they can prove they tried to get a tenant before they listed it for sale putting it back into rental property status?

[OldJack]

Why would trying before listing have anything to do with it? It was not rental property at the time of the cost incurred.

[michaelmars]

mom dies, the kids list it for rent, after a few months of no bites they decide to sell. Just thought that intent might work here.

[Pacun]

Not that matters, but it will help us understand your position, is there a profit o loss on the sale?

[OldJack]

mom dies, the kids list it for rent, after a few months of no bites they decide to sell. Just thought that intent might work here.

Its an argument that might work, but I would not want to make it and would expect to lose.

[michaelmars]

A Profit. i was thinking of adding the maintenance etc while trying to rent as additional basis on investment. I appreaciate your opinion Jack and as i said, i tend to agree but i wanted some other imput on this. They also have suspended losses from when it was a rental and some depr recapture so there is a lot of stuff in this little sale.

Also the numbers aren't that large to really make much difference in the long run, a year of maintenance is about $8000 even if deducted at cap gain rates it wouldn't be a major tax savings. gain is about $150000 with a few thousand of recapture and $28000 of 1250.

[Pacun]

Either way you will have the same results, so the IRS wouldn't care if you add it to the basis or use it on Sch E.

Now, if it is personal, then it is not deductible.

I would go with intent, provided the unit was ready to be rented and efforts were made to rent it. (Keep the records).

[michaelmars]

i wasn't even thinking of taking on E but i guess that is more consistant, and more bang for the buck at a higher tax rate. i have to make sure they can prove intent to rent.

thanks all!