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Unoccupied Rental
Q:
Subject: Question from Maryland: Rental to Primary
Hi Kenny,
Hope you can find the time to help.
My wife and I purchased a home in December 2005 with the intent of using it as an investment rental property. We tried , unsuccessfully, for about 3 months to find a tenant. During this time, we made repairs to the property. After about 3 months, we received an unsolicited offer from a buyer to purchase our PRIMARY residence. The offer was simply too good to refuse. We sold our PRIMARY and moved into the investment property. The investment property was only an investment property for 3 months. Can I deduct my expenses this year for depreciation and repairs made to the property during that 3 month period?
Thanks a bunch!
A:
This is the kind of issue you really need to work on with your personal professional tax advisor because it involves a lot of judgment calls, including taking into account your other rental experience.
For example, if this is the only rental property you would be reporting on your 1040, I would be much more hesitant to claim anything as a rental expense than if you already had dozens of other rental properties.
First off, you always need to keep in the back of your mind the fact that the burden of proving that you are entitled to each specific deduction is 100% on you and you need to be ready to defend your position if IRS were to challenge it.
In a more general sense, you should be able to deduct the direct costs of specifically trying to rent the home, such as ads you paid for.
On the other hand, repairs and capital improvements that you ended up using personally would be very difficult to justify deducting as rental expenses.
Similarly, claiming depreciation would also be inappropriate.
Again, your personal professional tax advisor should be able to address each specific expense more intelligently in relation to your circumstances.
Good luck.
Kerry Kerstetter
Follow-Up:
Kerry,Thanks so much for the fast answer!
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/31/2006 01:42:00 PM Send this post:
