My son has condo that he lived in from 2006 to June 30 2011. It has been available to rent since july 1 2011. didn't actually rent until Sept. 1 2011. He is going to sell it this year. Bought for $282,000 Value at rental $262000 Probably will sell about $230,000.
Depreciation so far is about $14,000.
After completing his taxes this year I tried fooling around with a hypothetical sale just to see what it would do. I am using Turbo Tax -- I worked for H&R Block in the 1990s so know something about the process, but haven't kept up with how this is treated. Turbo Tax is doubling the cost of the place, telling me it doesn't qualify, but gives me a huge deduction - could be because using the program it isn't able to show 2 years of rental use.
Questions:
- When figuring gain or loss the depreciation needs to be accounted for. So depreciation is subtracted from origianl cost or value at conversion?
- Taxable gain (loss) is Sale price (takaing cost o sale into account) Minus the number from step 1 ?
- Is this number fully deductable in the year of loss or limited to 00 per year?
So in above example -- Basis for house $262,000 -depreciation $20K (allowing for some depreciation for partial year this year. Basis --- $242,000
Sale price $230,000 minus $20K sales expense = $210,000. Loss on sale $30,000.
Is this correct? what else am I missing?