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Primary residence, turned into rental, now sold

This is a 2015 tax question, just now working on it (filed extension). I bought my first home in 1994, paid 80k and spent 30k in improvements over the years. In August, 2012 I bought a new home for 360k and turned my old one into rental property with a basis of 110k. In March of 2015 I sold the rental for 150k and also sold my new home for 350k the following month (I now live with my sister). I now have about 40k (not counting depreciation) of gain on my first primary residence that I turned into rental, and 10k loss on my latest primary residence. Have I lost the ability to exclude the first 250k in gain for single persons on this rental, even though at time of sale I had lived in it for 2 of the preceding 5 years? Thanks for help!

Reply to
Susan
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No. Your capital gain on the sale of the rental property is still eligible for Sec. 121 gain. You will also be subject to tax on the any recapture of depreciation. Your loss on the sale of the replacement residence is non-deductible and cannot be used to offset any of the gain from the first property.

Ira Smilovitz

Reply to
ira smilovitz

In addition to the depreciation being recovered, as Ira noted, approximately 1/4 of the gain is not excludible, the ratio being the number of days (since 2009) in which you owned but did not live in the house, divided by the total number of days you owned the house.

-- Arthur Rubin, AFSP, CRTP, in Brea, CA

Reply to
Arthur Rubin

Susan,

The deductions you have taken (or were allowed to take, but didn't) for depreciation will be subject to tax as recaptured depreciation.

You are eligible for the full Section 121 exclusion because although you have "nonqualified use," it will not be included in any calculation because of the exception states the period after the home was last used as the principal residence but before the date of sale is not included as nonqualified use. I wish I could write that in a more succinct way!

Your $10,000 loss on the other residence is a nondeductible personal loss.

Beth Parziale, EA

Reply to
Beth Parziale, EA

I think you are remiss in not pointing out the solution to the failure to take depreciation. Amended returns are one possibility, but are there others?

Reply to
Taxed and Spent

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