I bought a house in 2014 for my son to live in expecting to also rent to a roommate and make a profit. Intention was to have a "for profit" rental. This never happened. Each year I had a loss between rent received and rental expenses. I sold the property in 2017. Also, in 15 and 16, TT led me to put in personal days of use for the days the property was not rented at fair market value, so I now have a complicated mixed used property with varying days of business vs personal use each year. I have worked through the math and recorded the sale as partial business and partial investment according the average percentages of use, and recaptured the depreciation and losses, but from what I have read, the IRS will likely disallow the business and characterize this whole venture as a "not for profit" rental (family member occupied, business loss each year). So, what is the best option? If I make the sale as "not for profit," how do I record it? Do I have to amend 2014-16 returns? I never had any profit (expenses offset the rent received each year) so line 21 was always 0 anyway, and the carry over losses have never been allowed. They have carried over to this year and help offset the depreciation expense as I have computed the sale. If I sell as "not for profit rental" I think the net tax result is about the same as what I have already computed, but I would prefer to not have the IRS question my return. I would greatly appreciate experienced advice.
