non-deductible depreciation expense

[Gas6]

Sold vacation rental after using it/renting it for a few years.  I understand how to determine the basis of the property.  My question is do I have to deduct the amount of depreciation that was not allowed due to Vacation Home Loss Limitation from the basis?

[tagteam]

The amount would be that which was allowed or allowable.

In your case, those figures are the same; you were only allowed to deduct the amount not due to the loss limitation and that amount was the amount of depreciation allowable. In other words, there would be no recapture (or reduction in basis) of the amount that was not allowed to be deducted.

[Gas6]

Thank you for your quick response to my question regarding depreciation expense.  My brain is a bit foggy after reading through lots of IRS publications.  So it is your opinion that since depreciation expense was never reported on Schedule E due to Vacation Home Loss Limitation that the basis for sale is not reduced by the  accumulated depreciation amount carried forward?

[tagteam]

Yes, if it was never allowed (as a result of the limitation), then the basis is not reduced by the amount not allowed.

[RobertB4444]

If you were not allowed to deduct it then you would not have to recapture it.

HOWEVER, your passive loss carryforward is deductible in the year that you sold the property.  If that passive loss carryforward, which you get to deduct this year, includes all of that depreciation then you WERE allowed to deduct it.  You just had to wait.  And you will have to recapture it.

@Gas6 

[tagteam]

That's true, @Gas6; if you have a suspended loss (carryforward) that includes the accumulated depreciation which would be released upon a sale, then the basis would be reduced accordingly.

Check to see if you have a Form 8582 (which you may not have if you used the vacation home as a residence; more than the greater of 14 days or 10% of the days rented at fair rental value).