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Tax Law (Questions About Taxes)/Second home for daughter while a dependent student ly if you are cha


QUESTION: I have been treating the home as a rental for taxes. I was told this might not be correct. If I need to correct prior years to show as a second home, is there any issue?

ANSWER: Barbara,

Thanks for your question.

It would be treated as a rental only if you are charging her rent at fair market value.

If you are charging rent, bit not market value, it is a rental not-for profit. Rent would be shown on line 21 as other reviewers nome. Otherwise deductible items would be deducted on Schedule A. If rent minus those item still results in a profit, other rental expenses are miscellaneous itemized deductions up yo the amount of profit shown. No loss can be taken.

If you're not charging rent, it is simply a second home.

You need to amend any return in which the proper treatment was not given to the house. Do this by fil is Form 1040X for each year involved.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

QUESTION: Thank you. How many years can be amended?

ANSWER: That depends.

Normally, the statue is 3 years. However, if there is a substantial understatement of taxes due, it is extended to 6 years. A substantial understatement is 25% of the tax owed. Finally, if the IRS determines if a false or fraudulent return was filed, there is no statute of limitations. In my opinion, your situation is one in which a false return has been filed.

Hope this helps.

John Stancil, CPA

Hope this helps.

---------- FOLLOW-UP ----------

QUESTION: Yes, thank you. How is the sale handled for a not for profit vs second home?

Either way, the gain is taxable since it does not qualify for exclusion as your main home. If you took any depreciation on the house, any profit represented by depreciation is recaptured and taxed at a maximum rate of 25%.

Hope this helps.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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