| |
You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Sale of Personal Home Turned Rental
Expert: Glenn D Schnabel - 11/6/2009
Question
In July 2008 we bought a new home and put our old home on the market. In late December a friend told us her brother was looking for a rental and suggested us since we needed the income to help pay for both homes. We signed a one year lease (1/1/09 to 1/1/2010) with the renter for the old home. We ended up selling the home October 30, 2009 and negotiated with the renter to terminate the lease 1 day before the closing (buyer didn't want to be a renter). The home was for sale while be rented. But at one point we were negotiating with another possible tenant to take the home off the market and lock a 2 year lease (and get rid of current renter who was causing damage to home).
Rent paid the mortgage but not property taxes (ergo cash-basis loss). Also we had to eat $1,000 worth of damage to the home by the renter (the deal we made with him to terminate lease early, ergo we used his security deposit (one month rent equivalent) for his last month of rent, and thus couldn't use it for the damages and promised to hold him harmless for the damage).
We bought the home for $260,000 in 2002 and sold it for $240,000 the end of October 2009. Less commissions, etc we got approximately $220,000.
What, if any, loss can we take on the home? I assume rental income/loss flows through Schedule E.
Answer
Troy,
Alot of this has to do with intent and what actually happened. If you converted your home to rental, you probably could have a small rental loss. You could consider it a rental from July 2008 to the date of sale. This just seems like it would be a incidental rental and the loss would not be deductible since the property was indeed your principal residence. A loss as a result of selling a principal residence is non deductible loss.
The facts and circumstances show that the rental was incidental to the sale.
You probably would not be able to get away with declaring that short period as rental. I would suggest declaring the income, writing off the real estate taxes as itemized and take a casualty loss on the damage to the property (IRS form 4684)
Add to this Answer Ask a Question
|
|
