Steelers61
Returning Member

Sale of a Rental Property using the 10 Year Suspension and 5 Year Test Period as a Military Retiree

In 2020 I sold a rental property that was my original primary residence while in the military. After many years of moving  I decided to use the residence as part of my S-Corporation rental property. As a military retiree I decided to use the 10-Year Suspension and 5-Year Test period to claim the property as a primary residence. I understand that I must recoup the depreciation cost but I do not know where in Turbo Tax Business to state this information. 

Investors & landlords

First they highly recommend you seek local professional guidance to make sure that you’ve done this correctly in the past and you do this correctly going forward. Hopefully you re-titled the rental property into the corporations name. If you did you now have to take it out of service on the corporation and probably need to retitle it back to your name. The sale will be reported on your personal return in the home sales section.  I’m not sure If you can sell it off in the corporations name and then use it on your personal return. Not sure if the IRS will follow the bouncing ball. Again have a talk with a local professional possibly a real estate attorney that understands income taxes to get help with your situation.

Carl
Level 15

Investors & landlords

After many years of moving I decided to use the residence as part of my S-Corporation rental property.

That may be a problem if the property was titled to the S-Corp. I highly advise you seek professional help on this with a tax-pro familiar with the laws of the state where the S-Corp is/was registered. If the property was titled to the S-Corp, that may negate you claiming it as a primary residence or claiming the suspension period. But I don't know that for a fact. Professional help is needed.

 

Investors & landlords


@Steelers61 wrote:

I decided to use the residence as part of my S-Corporation rental property ... to claim the property as a primary residence. 


 

A corporation does not have a primary residence, so the Principal Residence Exclusion does not apply to a corporation.

Investors & landlords


@AmeliesUncle wrote:
A corporation does not have a primary residence, so the Principal Residence Exclusion does not apply to a corporation.

I concur; a corporation (S or C) does not qualify under Section 1.121-1(c)(3).