MsTabbyKats Posted March 14, 2014 Report Share Posted March 14, 2014 I've never done this before...so please let me know if I did it correctly. Client paid $240,000 in 2006 Client sold for $20,000 in 2013 Huge loss Subtract sales price and depreciation from cost...and we get the loss (-$164,000) on form 4797 Part I Huge refunds! He can waive the carryback period...and take the loss in 2014, 2015 etc. Does this sound correct? Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 14, 2014 Report Share Posted March 14, 2014 It seems correct, just keep the records. Make sure you elect to forgo the carry back loss, which is automatically. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted March 14, 2014 Report Share Posted March 14, 2014 I wish mine had turned out similar to that. After adding back depreciation, my Grandson had a pretty sizeable gain. No carryforward there. Good thing their new baby helps offset the gain. Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 14, 2014 Report Share Posted March 14, 2014 Was this an above board sale? It wasn't sold to a friend/relative for $20K was it? If so, its a related party transaction and I think the loss is disallowed. We'll figure that out depending on your response. It looks fishy to me. Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 14, 2014 Author Report Share Posted March 14, 2014 Was this an above board sale? It wasn't sold to a friend/relative for $20K was it? If so, its a related party transaction and I think the loss is disallowed. We'll figure that out depending on your response. It looks fishy to me. I know what you mean. He owned/rented this property with a friend. Not a relative....... And then for whatever reason....he sold it to her for $20K. However his name is still on the deed and mortgage....but she pays all the bills...and she uses it for her personal use. It's just a friend...not a significant other Thoughts please.. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted March 14, 2014 Report Share Posted March 14, 2014 I know what you mean. He owned/rented this property with a friend. Not a relative....... And then for whatever reason....he sold it to her for $20K. However his name is still on the deed and mortgage....but she pays all the bills...and she uses it for her personal use. It's just a friend...not a significant other Thoughts please.. Sounds like an arms length transaction and no loss deduction. Actually, not enough information to decide for sure. How did he own/rent it "with" a friend, but he is the sole owner and then he sold it to the person he "owned/rented" it with? Warning bells on this one.... Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 14, 2014 Author Report Share Posted March 14, 2014 Big warning bells....and my research is telling me that since they were partners...no loss. I think I told the whole story. The mtge is on his name...but they split everything For whatever reason....she gave him $20K...they no longer rent it...and she uses it. I'm thinking I should just take his part out of service .....and give him half the mtge interest on his A. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 14, 2014 Report Share Posted March 14, 2014 Big warning bells....and my research is telling me that since they were partners...no loss. I think I told the whole story. The mtge is on his name...but they split everything For whatever reason....she gave him $20K...they no longer rent it...and she uses it. I'm thinking I should just take his part out of service .....and give him half the mtge interest on his A. If he no longer rents it and you are taking it out of service, and he also does not live there, then the interest expense on the mortgage becomes investment interest expense. That is reported on form 4952, and the deduction is limited to the amount of investment income. The taxpayer can elect to income cap gains in that income, but then he loses the cap gain rate. If contemplating making that election, you need to calculate it both ways to see which is better. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted March 14, 2014 Report Share Posted March 14, 2014 This really sounds twisted. Her name is on the deed but not on the mortgage? And they were splitting the rent 50/50? And now she lives on the property? So maybe the $20,000 was for his future loss of income? Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 14, 2014 Author Report Share Posted March 14, 2014 This really sounds twisted. Her name is on the deed but not on the mortgage? And they were splitting the rent 50/50? And now she lives on the property? So maybe the $20,000 was for his future loss of income? Her name is not on anything....all in his name...and will be there until she chooses to refinance. This was not any kind of legal transaction...just cash passing. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 14, 2014 Report Share Posted March 14, 2014 MsTabbyKats, in one post you said she pays all the bills, and in another you said his name is on the mortgage and they spilt everything. So to add to what I posted above, your client can only take an interest deduction for the portion he is liable for (is that 50% or 100%? ) AND that he actually paid. So, did he pay all of the interest expense or only part of it? Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 14, 2014 Author Report Share Posted March 14, 2014 Sorry if I'm confusing.... His name is on the deed and mtge....not hers. Until this year.....they split everything...income and expenses. He took half of the mtge interest and real estate tax...although on paper he paid it all. I 'm not positive about this year...I think he paid half of the mtge and none of the tax. At this point I don't think he is entitled to his huge loss. I don't know what happens if she sells it to a disinterested party in the future since his name is on the deed. I think, at this point, I will just take it out of service...and then figure out what to do with the the mtge interest. ETA..client isn't trying to get away with anything. He and I are trying to avoid future issues. And, I have no idea why he gave up his share for $20K! Quote Link to comment Share on other sites More sharing options...
MsTabbyKats Posted March 14, 2014 Author Report Share Posted March 14, 2014 Just heard from him....she pays for everything. She's the owner in every way, except legally (title). So...what's the verdict ? Take it out of service....period? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 14, 2014 Report Share Posted March 14, 2014 Take it out of service, yes. As for the "sale", does he have anything spelling out the details, especially when the title is to change? What happens if she wants to refi? Or sell? Does he get any share of the proceeds then? I would not report it as a sale without them drawing up at least a simple "Sales Agreement" that spells out answers to those questions. As long as he holds title, he has not sold it, unless there is a signed and notaried contract, in which case there might be an installment sale. Or a gift tax situation? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 14, 2014 Report Share Posted March 14, 2014 Yes, I agree with KC. Additionally, as far as the property taxes and interest deductions are concerned, he has no deduction because he didn't pay anything. She can't deduct them even though she paid because she has no legal title or legal obligation for them. Quote Link to comment Share on other sites More sharing options...
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