Solved: Should I claim the $57,000 loss on my rental property even if I never claimed the rental income and expenses on prior returns?
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heidi-blue
New Member

Should I claim the $57,000 loss on my rental property even if I never claimed the rental income and expenses on prior returns?

Bought home for $302,000 in 2006. Lived it in for 3 years. Started renting it out in 2009 and rented it every year until I sold it last February for $245,000. I never claimed the rental income or expenses on a tax return primarily because I never profited. Can I claim the loss plus sales commissions despite not filing "correctly" in the past?

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Accepted Solutions
DanO
New Member

Should I claim the $57,000 loss on my rental property even if I never claimed the rental income and expenses on prior returns?

No, it doesn't look like you wouldn't actually have a loss.

You converted your primary residence in 2009 and when this was done the value of the rental property would be the lower of 1) the adjusted basis on the date of conversion, or 2) the property's fair market value (FMV) at the time of conversion.

The over the next 8+ years the rental property would depreciate over a 27.5 years period.  So if your rental was worth 315,000 at conversion time.  The depreciation whether actually taken or not would be $315,000 / 27.5 = 11,455 per year.  This would amount to $91,640 that would need to be recaptured.  So you would have no loss.

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1 Reply
DanO
New Member

Should I claim the $57,000 loss on my rental property even if I never claimed the rental income and expenses on prior returns?

No, it doesn't look like you wouldn't actually have a loss.

You converted your primary residence in 2009 and when this was done the value of the rental property would be the lower of 1) the adjusted basis on the date of conversion, or 2) the property's fair market value (FMV) at the time of conversion.

The over the next 8+ years the rental property would depreciate over a 27.5 years period.  So if your rental was worth 315,000 at conversion time.  The depreciation whether actually taken or not would be $315,000 / 27.5 = 11,455 per year.  This would amount to $91,640 that would need to be recaptured.  So you would have no loss.

View solution in original post

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