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Tax consequences of vacant real estate

I've been told that if you have unrented real estate, you're entitled in the USA to deduct from gross income not just the property taxes, the cost of minimal heating, and maintanance of the vacant propery, but also the lost rent, that you could have made if it were rented.

This is hard to believe. When I''ve been fired or laid off, can I deduct from my other income the lost salary I would have gotten if I were still working?

And even if true, wouldn't it still be better to have rented it? If corporate income taxes are 50%, like I think they once were, or 20% like I was told they are now, deducting $1000 of lost rent would save the taxpaper either 500 or 200 dollars, but renting it would bring in $1000. Doesn't every landlord try diligently to rent their vacant properties?

Reply to
micky
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You've been told wrong. If you are a cash basis taxpayer, and most individuals are, you can only deduct expenses you have actually paid. You cannot deduct lost income. On the other hand, if you are an accrual basis taxpayer, you would have reported the income when your right to it was fixed and determinable. In that case, a failure to collect the cash would represent a deductible loss (returning you to the same position as the cash basis taxpayer who didn't collect the rent).

Ira Smilovitz, EA Leonia, NJ

Reply to
ira smilovitz

I see. In the case I have in mind, the lease had expired, so there was no expectation of rent.

Any difference for corporate owner/income tax?

Reply to
micky

Well, most corporations do accrual rather than cash accounting, but it doesn't make any other difference.

Reply to
John Levine

Thanks Ira, John. Now the question is whether to tell the friend who told me otherwise. He might not like being wrong. He's a retired lawyer, but not tax law and he never owned a business, or property other than the co-op and later the house he lives in. But he said this deduction was something people had complained about for years, as if he knew what I was asking about.

Reply to
micky

I wouldn't bother, unless he specifically asks. He's unlikely to believe you anyway.

Reply to
Stuart O. Bronstein

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