huntsville homes for sale

With market values going down in most markets, taxpayers would like to turn the sale of a personal residence loss (which is not deductible) into a capital loss (which is deductible) but it could potentially backfire if it is not handled correctly
December 11th, 2011 10:12 AM
With market values going down in most markets, taxpayers would like to turn the sale of a personal residence loss (which is not deductible) into a capital loss (which is deductible) but it could potentially backfire if it is not handled correctly
Active participation standards are met if the taxpayer or the taxpayer’s spouse participates in management of the rental property in a significant and bona fide sense. For example, management decisions such as approving new tenants, deciding on rental terms, approving expenditures, and similar decisions meet active participation standards.
This said it is important that simply “saying” you perform these duties is not adequate. They must be documented in the form of signed leases, emails approving expense, rental and property management decisions, approve repairs and maintenance quotes, etc. Documentation is key to preventing the IRS from disallowing these deductions. Simply put the IRS cannot audit air, only what is documented.
This does not prevent homeowner’s from engaging in a property manager to assist them with operating the property but they must stay involved.
Lastly the $25,000 special loss allowance benefit begins to be reduced starting at a $100,000 of adjusted gross income for someone married filing joint and completely phases out at $150,000 Adjusted gross income. AGI.
There is a difference between a Huntsville homes for sale being treated as an investment/rental property and rent incidental to a sale. A six month lease would probably be considered as rent incidental to a sale. This expenses would just increase basis of the personal residence. Leases should be for at least a year.
Each situation has specific circumstances and this information should be reviewed with a qualified tax professional before relying on it’s accuracy and application This is general information about meeting the “active participation” standards which would allow a real property owned to deduct these losses.
There are additional specific situations that can affect these rental losses as well which need to be looked at on a case by case basis. The most important thing is the need to have supporting documentation for these rental real property activities
You’ve got to be careful about turning a personal residence into a capital gain asset. I know that with market values going down taxpayers would like to turn the sale of a personal residence loss (not deductible) into a capital loss (deductible) but it could potentially backfire if it is not handle correctly. The other the timing between converting a personal residence to rental property and the sale of that same property.
The bottom line is the IRS will look at the facts and circumstances of a taxpayer’s position and if they deemed as tax avoidance they will disallow that position.
The information provided in here is stated in general terms. We are not tax professionals and readers must contact a qualified tax professional before relying on this information