Catherine Posted February 8, 2014 Report Share Posted February 8, 2014 Clients moved to MA in 2009. Were unable to sell their home and so began renting it out. Were given FMV from realtor of 700K as of date rental began (had purchased some years earlier for well over 800K, had tried to sell in 2009 in the 760K range with no takers). Have rented home since mid-2009 and have taken depreciation every year now totaling roughly $100K. Finally sold the place in 2013 -- for less than $500K; a huge loss. How can I determine how much (if any) of this is now a *business* loss and how much would have been considered a *personal* loss? It's now been long enough that they would not have been able to exclude any gain as sale of principal residence. Had they purchased the place for 700K as an investment it would be pure business capital loss. But I can't find any info on how treatment may change if it was personal property *converted* to business property. TIA, Catherine Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted February 8, 2014 Report Share Posted February 8, 2014 I can't find any info on how treatment may change if it was personal property *converted* to business property. Your exact scenario is an example on page 10 of Pub 551. Basically, take the loss as adjusted from 700K. I would suggest documenting the 700K, because it seems to be based on what it was not worth in 2009, and Realtors have a bias towards higher values. At least verify that some measure of local property values has continued to fall another 25% since then. Quote Link to comment Share on other sites More sharing options...
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