Vacation Rental to Personal in ATX

[jlewis]

Client had vacation rental from 2000 to 2010, converted back to 100% personal for 2011 & 2012 and has some carryover losses pending. For 2011 & 2012 I simply overrode asset depreciation to zero to keep record of cost/accum deprec through 2010 because program didn't allow me to simply change business use to zero . For 2013 I am trying to use asset disposition tab-converted to personal use-to maintain asset history since client says they will sell property in late 2014 or 2015. My question, if anyone knows - when property is sold in 2014 or 2015 is it possible to change 2013 asset tab from converted to personal use to sale in order to properly be reported?

Would also like to know if anyone in past encountered situation of converting property back to personal use for more than one year before selling what procedure was used to keep program from depreciating further an maintain asset info.

Thanks for any replies.

[jklcpa]

I have the exact same problem with a client that was in this morning. Beach condo rented for a couple of years, last year rented was 2008 and sold in 2014. I do not remember whether I converted the assets to personal use, but the asset listing is not in my ATX input for years following that, although the program is showing a carryforward of depreciation due to the personal use limitations. On the depreciation schedule that ATX generated, the accumulated depreciation is the full amount before the limitation.

What I did in those years where it was not being rented, I filled in the Sch E with -0- days rented, 365 of personal use, and -0- rents to maintain the carryforward. I don't know whether this was exactly the correct way to handle, but that is what I did.

When it is sold, what happens to the depreciation carryforward and the fact that the depreciation schedule's accumulated depreciation is at the full amount, that was never really deducted on any return due to the limitation? Is the basis higher by the amount of depreciation not ever deducted, or is this a case of allowed or allowable where the TP is screwed? (ETA - pub 523 says for deprec after 5/6/97: "If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed.")

Edited March 7, 2014 by jklcpa
added info about deprec allowed