Sold rental prop. on 1/4/24. Had carrying and fixup costs dur.Aug-Dec of 2023. If I claim these expenses for 2023, how to answer TT qq about date of sale?

[ersu79]

P.S. the place was tenant-occupied Jan-July 2023, but was unoccupied through Aug-December of 2023.

[Carl]

So long as you were actively trying to rent after the renter moved out, (i.e.; advertised as "for sale or rent" as an example) all costs incurred and paid in 2023 are deductible rental expenses on SCH E for 2023.

Date sold is the closing date of the sale. So you won't report the sale until next year when you complete your 2024 tax return. Any carrying costs will be claimed on the 2024 tax return next year, regardless of what year you actually incurred/paid those costs.

[ersu79]

Thank you Carl, this is enlightening.
This Coop property was not allowed to be rented out after July  31, 2023 (the Coop Board changed the rules after my 30 yrs of renting it out). As I plan to report the sale on my 2024 tax return, will I be allowed to deduct pre-sale expenses incurred in 2023? 

[Carl]

I was not aware this was coop property. So I don't know if you are the sole owner of a unit what you are selling, or if you're just selling your share of a single unit. Unfortunately, I'm not very knowledgeable on coop stuff. So I'm really not very helpful on this front.

@AmeliesUncle may be of more assistance.

[ersu79]

Thanks again Carl, I will try to contact AmeliesUncle as soon as I figure out how to direct my post to a particular person at TT.  Meanwhile, after 30 years of tax reporting, I haven’t found any differences between the rules for it vs. rules for my other rental property which is not a coop. I would like to ask you to proceed with the answer as if this was not a coop.  If agreeable, here’re my restated questions.

A sole ownership rental property was rented out for first 7 months of 2023, then taken off rental market on 8/1/23 and listed for sale. Contract was signed in October 2023, closing occurred in early Jan.2024. Questions:

1. in the last 5 months of 2023 while the property was not offered as rental, I had carrying costs. Are they deductible, and if so, in which year?

2. in the last 5 months of 2023 while the property was not offered as rental (as is typical when trying to sell a rental property),  I had the place fixed up in preparation for sale (painting, minor repairs, cosmetic improvements, periodic visits, but no capital improvements). Are these deductible, and if so, in which year?

Your answer would be much appreciated.

[Critter-3]

This is how to summon someone ... put a @ in front of their name ...    @AmeliesUncle 

[Carl]

I summoned @AmeliesUncle because he's more knowledgeable on the co-op stuff than I am, by far.

1. in the last 5 months of 2023 while the property was not offered as rental, I had carrying costs. Are they deductible, and if so, in which year?

If the property was not offered for rent (regardless of reason) between the time the last renter moved out, and the closing date of the sale, then you don't have "any" carrying costs unfortunately. The house has to be converted to personal use, effective one day after the last renter moved out.

2. in the last 5 months of 2023 while the property was not offered as rental (as is typical when trying to sell a rental property),

Actually, it's not as typical as one may think. In my limited experience and exposure to such situations, it's typical to advertise the property as "for sale or rent", and you just set the rent so high that you're more likely to get a buyer, than a renter. But then, if you do get a renter willing to pay the ridiculously high rent, why not take them? You can also do other things in an attempt to legally disqualify a renter, such as a credit check, criminal background check, and the such.

I had the place fixed up in preparation for sale (painting, minor repairs, cosmetic improvements, periodic visits, but no capital improvements). Are these deductible, and if so, in which year?

Expenses for things such s painting, minor repairs, cosmetic improvements and the such that were incurred after the last renter moved out are just flat out not deductible anywhere unfortunately. That's just the cost of maintaining personal use property. However, capital improvements are just added to the cost basis of the property and will of course, reduce your taxable gain on the sale.

Your answer would be much appreciated.

Things may be different for a co-op for all I know, and if your state taxes personal income and regulates co-ops. Like I said, I just don't have the knowledge necessary to know that anything stated above will apply to you, and would advise you take it with a grain of salt unless someone else chimes in who has more knowledge in this area, and agrees.

[AmeliesUncle]

I agree that IRS guidance and/or court rulings agree with Carl's answer.

Personally, I would claim the carrying costs and go to Tax Court if the IRS disagreed with me.   In my opinion, putting up the property for sale (and therefore no attempt to rent it) doesn't automatically make it a non-rental.  But as I said, I think there are things that disagree with my viewpoint.  The 'fix up' costs are also debatable, but are sometimes added as selling expenses (although I think there is IRS guidance or rulings that disagree with that as well).

So I'm not going to give a solid answer.  The safest route is to not claim them.  But if you want to be more aggressive and potentially 'fight' the the deductions, you might choose that option.