topic Business Portion Only - Asset Sale Price in Investors & landlords

Business Portion Only - Asset Sale Price

twilson040558 — Thu, 06 Feb 2020 19:33:00 GMT

Hello. I have seen some responses on this subject but nothing that provides any detailed help for someone who has rented a vacation unit for summers and winters, and uses the property personally for one month in the spring and one month in the fall. I am assuming that the "Business Portion" would be the ratio of the rental days in summer/winter divided by the days of total use (ie. business and personal). Is this correct? It makes a drastic difference on the capital gain amount to be able to reduce the asset sale price through this process. Thank you.

Re: Business Portion Only - Asset Sale Price

AmyC — Mon, 10 Feb 2020 23:26:57 GMT

The IRS formula is # days rented divided by # days used (both personal and rented).

Days available for rent do not count.

You can find more information in IRS Pub 527 for Rental Property, specifically beginning on page 17.

The IRS also has an interactive tax assistant tool to help with determining expenses.

IRS ITA for rental expenses.

Re: Business Portion Only - Asset Sale Price

twilson040558 — Tue, 11 Feb 2020 13:48:41 GMT

Thank you for these pointers to actual IRS docs. Over the years of renting we have used the ratio that is described here to determine how much rental expense could be deducted in Schedule E. However, what is not clear in anything that I've read is whether this is also the same ratio to use for determining the sales portion to determine your potential taxable gain when the property is sold. I believe it makes sense that it would be but there is no clear instruction that I can find for determining the "business portion" of a sale price of the property. Thank you for your responses.