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Creative ways to deduct loss on a personal residence?
Posted on 5/1/12 at 3:03 pm
Posted on 5/1/12 at 3:03 pm
It's my understanding that you can't deduct losses on your personal residence only rental properties (please correct me if I'm wrong I would love to be wrong about this). Are there any creative ways to deduct these losses without converting the personal residence to a rental property?
Here's the story. My little brother and his wife just finished residency and they're moving clear across the country. They're going to take a pretty big loss on the sale of their home if they sell now. They've got an offer on the table that would result in a loss of about 15% and since they're moving so far away they don't want to rent it.
Here's the story. My little brother and his wife just finished residency and they're moving clear across the country. They're going to take a pretty big loss on the sale of their home if they sell now. They've got an offer on the table that would result in a loss of about 15% and since they're moving so far away they don't want to rent it.
2
Posted on 5/1/12 at 3:30 pm to Quigley
You can't take a loss on the sale of a personal residence, you are correct.
And if the home is converted into a rental property, the IRS has a nice little special basis rule to prevent the taxpayer from deducting the entire loss.
When converting to a rental property, your initial tax basis for calculating any loss on the sale equals the lesser of: (1) property's basis on the conversion date or (2) the property's fair market value (FMV) on the conversion date. This rule basically disallows the loss from the decline in value before it is converted to a rental property.
However, if the property is converted to rental property, and the taxpayer sells the property for a gain, the normal basis rules apply.
Hope this helped.
And if the home is converted into a rental property, the IRS has a nice little special basis rule to prevent the taxpayer from deducting the entire loss.
When converting to a rental property, your initial tax basis for calculating any loss on the sale equals the lesser of: (1) property's basis on the conversion date or (2) the property's fair market value (FMV) on the conversion date. This rule basically disallows the loss from the decline in value before it is converted to a rental property.
However, if the property is converted to rental property, and the taxpayer sells the property for a gain, the normal basis rules apply.
Hope this helped.
Posted on 5/1/12 at 4:11 pm to krehn11
Thanks. Was hoping there was something I gwas overlooking but guess they'll just have to take the loss.
Posted on 5/1/12 at 5:23 pm to Quigley
Your little brother could suffer a loss from a disaster that impairs the fair market value of the home. Then he could claim a deduction for the decline in value as a casualty loss. The hard part is arranging the disaster.
Posted on 5/1/12 at 8:50 pm to Poodlebrain
quote:
The hard part is arranging the disaster.
Posted on 5/2/12 at 12:24 am to DWaginHTown
My creativity is limited to interpreting and applying the tax code. The creativity necessary to arrange a disaster is above my pay grade.
Posted on 5/2/12 at 7:27 am to Poodlebrain
A sonic boom would satisfy this need according to the IRS.
Posted on 5/2/12 at 8:31 am to Poodlebrain
See if we can cook up a mudslide
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