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leecc34
Level 1

mixed Investment property principal residence

My sister and I bought a 2-bedroom condo 8 years ago in Illinois when we both expected to work and live there.  My sister did get her job there and live in the condo since, but I ended up working and living in NYC.  Last year we sold the condo at a loss.  My sister can't deduct her loss because the condo had been her principal residence.  But how about me?  It was neither my principal residence nor my second home (I have never owned any other property),  Can I treat my share of the condo as investment property thus reporting my loss just like my long-term stock gains/losses? Any suggestion or guidance from the community would be greatly appreciated.  

3 Replies
ColeenD3
Expert Alumni

mixed Investment property principal residence

Yes. Your share of the loss is deductible. It would be treated as a second home under investments.

 

  • Other investments (like a second home, collectibles, land, etc.)
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leecc34
Level 1

mixed Investment property principal residence

A follow-on question: “Unless a second home is used partially for rental, it’s loss is not deductible.”  So if my share is treated as second home, how can my loss be deductible?

Rick19744
Level 11

mixed Investment property principal residence

@leecc34 I don't think you would win a battle with the IRS should you claim a loss and the IRS challenges you.  In order to claim a loss here, you would need to provide support that your purpose in purchasing the home was for investment purposes.

However, based on your facts, you have a sister living there and you have never attempted to rent out the second bedroom (the one you technically were going to be using).

I don't mind gray areas, but this shade of gray is not good.

*A reminder that posts in a forum such as this do not constitute tax advice.*
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