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Tax implication of rental property sale

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norm0728

Junior Member
What is the name of your state? Indiana

I have a rental property question. I bought my personal home in April of 2000. We lived there until July, 2004. We rented it for one year, starting in September, 2004, until September, 2005. We listed it for sale, during which time it was empty. It finally sold in April, 2006. After we paid the mortgage, taxes, and realtor fees, we had a loss of about $2,500. My question is whether or not I can claim this loss on my 2006 taxes, or whether the property was not rented long enough to be considered a rental. We reported all income and expenses from the rental on our 2004 and 2005 tax returns, except that we did not take any depreciation on our 2005 tax return. Please help.
 


LdiJ

LdiJ

Senior Member
norm0728 said:
What is the name of your state? Indiana

I have a rental property question. I bought my personal home in April of 2000. We lived there until July, 2004. We rented it for one year, starting in September, 2004, until September, 2005. We listed it for sale, during which time it was empty. It finally sold in April, 2006. After we paid the mortgage, taxes, and realtor fees, we had a loss of about $2,500. My question is whether or not I can claim this loss on my 2006 taxes, or whether the property was not rented long enough to be considered a rental. We reported all income and expenses from the rental on our 2004 and 2005 tax returns, except that we did not take any depreciation on our 2005 tax return. Please help.
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I think that you are going to have to treat it as a primary residence. Therefore you would not get to take the loss. Had there been a gain, you would have treated as a primary residence in order to take the exclusion.

However, others may voice a different opinion.
 
T

tranquility

Senior Member
When I started to write on this yesterday, the post started to grow and grow and had so many if/then and caveats that it was not worth the time. I think you could treat this as a rental property and not a personal residence. The why and the facts needed to determine this take too long to explain and exchange so I decided not to post.

One thing that really concerned me however was:
It finally sold in April, 2006. After we paid the mortgage, taxes, and realtor fees, we had a loss of about $2,500.
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Paying off the mortgage does *NOT* reduce the amount realized on the sale. Especially if the OP took money out on a refinance, the sale may very well result in a profit and not a loss. Then we want Section 121.
 
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