Deductibility of Seller Concession for Repairs on Partial Rental Sale

Person sells a house that had been used as a partial rental. That is, he lived in the home but rented out the upstairs portion (approximately 40% of the house living space) to two tenants. He always reported rental income and included a prorated portion (40%) of general house repairs as rental expenses.

The buyer's inspector identified some repairs and the buyer agreed to provide a seller's concession credit in the closing for the cost of these repairs. Can he deduct 40% of these repairs as rental expenses as he always did in the past? Does it matter that the last renters moved out a few weeks before the close date?

No. A seller's concession credit is a reduction in sales price. This adjusts the gain/loss on the sale. It isn't an expense.

Ira Smilovitz, EA

Rick: Was there depreciation "allowed or allowable" during the rental period?