Landlord moves back in

on Schedule E?...ex. de-lousing, painting.?

I believe that the rules, regulations and court decisions surrounding IRC Sec. 121 (the section that allows for the exclusion of gain) have consistently used the date you occupied the home for the start of personal use and the date you departed the home as the end of personal use. As such, until the owner actually moves into the home it would not be personal use property. The property would remain rental property as long as the owner still held it out for rental or if not held out for rental, it would become investment property. Therefore, I conclude that the expenses you cite would be deductible on Schedule E as long as the property was still held for rent or they would be deductible on Schedule A as misc. itemized deductions. You state that the t/p intended to convert the property to personal use. As such, I would say that the expenses you cite are investment expenses and deductible on Schedule A if those expenses were incurred after the t/p made the decision to no longer rent the property. They would be deductible on Schedule E as long as the property was still held out for rental.

I believe that the rules, regulations and court decisions surrounding IRC Sec. 121 (the section that allows for the exclusion of gain) have consistently used the date you occupied the home for the start of personal use and the date you departed the home as the end of personal use. As such, until the owner actually moves into the home it would not be personal use property. The property would remain rental property as long as the owner still held it out for rental or if not held out for rental, it would become investment property. Therefore, I conclude that the expenses you cite would be deductible on Schedule E as long as the property was still held for rent or they would be deductible on Schedule A as misc. itemized deductions. You state that the t/p intended to convert the property to personal use. As such, I would say that the expenses you cite are investment expenses and deductible on Schedule A if those expenses were incurred after the t/p made the decision to no longer rent the property. They would be deductible on Schedule E as long as the property was still held out for rental. ========= I would generally agree with the above, but I would make the determination as follows: Any and all expenses necessary that bring the property back to habitable condition following damage caused by a renter would be attributed to rental use (assuming no casualty loss deduction taken). Expenses beyond that (e.g. painting for the sake of changing the color only) would not be. General maintenance beyond a minimal habitable condition that aren't cosmetic nor improvements may be a toss-up.

I would attribute expenses to bring the property back to the expected condition (pre-rental condition plus normal wear and tear) to the rental. I think "habitability" is too low a threshhold. (E.g. tenants destroyed dishwasher. The place is still habitable, but repairing/replacing the dishwasher is an expense of renting to them.)

Seth