grandmabee Posted September 10, 2009 Report Share Posted September 10, 2009 Isn't there a new law that starts in 2009 where you have to figure the gain different on personal residence sales and rentals. If you lived in your house 2 out of the last 5 years but rented out as rental part of the other years. I seem to remember there was a change. Can't seem to find it now to read up on it. Before all you had to do is pay on the deprecation taken after May of 1997. But now I think you have to pay on part of the gain as well. Anyone know? Quote Link to comment Share on other sites More sharing options...
mactoolsix Posted September 11, 2009 Report Share Posted September 11, 2009 Isn't there a new law that starts in 2009 where you have to figure the gain different on personal residence sales and rentals. If you lived in your house 2 out of the last 5 years but rented out as rental part of the other years. I seem to remember there was a change. Can't seem to find it now to read up on it. Before all you had to do is pay on the deprecation taken after May of 1997. But now I think you have to pay on part of the gain as well. Anyone know? As I understand it . . . . Beginning 2008, the computation for the gain on the sale of a private residence has changed to a percentage method for those that did not use the home as their main home after 2008. Suppose a married couple filing a joint tax return purchases an investment property after January 1, 2009 and rents it for seven years. They then convert it into a primary residence for three years before selling it. In this situation, only 30% (3/10 years) of the gain would be eligible for the $500,000 exclusion and 70% 7/10 years) of the gain would be subject to tax. Before 2009, it would have qualified for the total $500,000 exclusion. This law is not retroactive so the period prior to 2009 is ignored. Hope that helps, Mike Quote Link to comment Share on other sites More sharing options...
grandmabee Posted September 11, 2009 Author Report Share Posted September 11, 2009 As I understand it . . . . Beginning 2008, the computation for the gain on the sale of a private residence has changed to a percentage method for those that did not use the home as their main home after 2008. Suppose a married couple filing a joint tax return purchases an investment property after January 1, 2009 and rents it for seven years. They then convert it into a primary residence for three years before selling it. In this situation, only 30% (3/10 years) of the gain would be eligible for the $500,000 exclusion and 70% 7/10 years) of the gain would be subject to tax. Before 2009, it would have qualified for the total $500,000 exclusion. This law is not retroactive so the period prior to 2009 is ignored. Hope that helps, Mike ok so taxpayer owned house for 15+ years as personal residence then in July of 2008 moved to another state and rented out. Now in September 09 is selling the house. So does this mean that none of the house is eligible for the exculsion. or would it be that the half is eligible? 6 months in 08. ?? Any help please Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted September 11, 2009 Report Share Posted September 11, 2009 The new law does not apply to your example because the conversion from personal to rental occured prior toJanuary 1, 2009. Therefore the old rule applies (depreciation recapture at 25%). taxbilly Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 11, 2009 Report Share Posted September 11, 2009 And if it had applied, it would be 15/16th excluded, given your example. But, as Bill pointed out, this one is not retroactive, it only comes into play on newly purchased property, bought after Jan 1, 2009. They are just trying to block people who have been taking advantage of the special treatment of home sales. For example, I had a client who used to have 4 rent houses, who back when the exclusion first started, sold his personal home, excluding the entire gain, and moved into one of the rentals. Three years later, he sold that one, excluding quite a bit more gain, and moved into another rental. He's been in it 4 years now, and has it on the market, and plans to move into another of his rentals! Of course, being smart, each time he planned it for some time, and fixed each one up while still a rental, getting as much deduction as possible while still rented. He's paid some tax on each of these sales, but not nearly as much as he would have had this new rule been in place all along. Heck, the one he's in now has been rented for 35+ years. Quote Link to comment Share on other sites More sharing options...
Edward Posted September 13, 2009 Report Share Posted September 13, 2009 In case anyone is interested, the new rules for "Sale of Main Home" is contained in revised June 2009 IRS Pub 553, Chapter 1. In addition there is a recap of many other 2009 tax law changes that will be taking place for 2009. Very interesting reading. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted September 14, 2009 Report Share Posted September 14, 2009 Thank you very much, Edward. Quote Link to comment Share on other sites More sharing options...
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