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I need help from a tax expert about a rental property

November 3rd, 2016 at 11:55 am

Anyone out there that can help?

We had purchased a home back in Aug 2006 for $288,000.

We lived in it until Aug 2012 when we started renting it out (we purchased a different home to live in and could not sell this one at all so renting was the only option).

The same family has been renting the house since Aug 2012 and now are ready to purchase it.

We haven't figured up the final number but I'm going to start with offering it at $250,000 and we'll probably end up selling it for a bit less than that but ultimately, we are definitely selling the house for a loss when compared to our purchase price of $288,000.

We have filed the property as a rental property each year on our taxes, claiming the rental income and all expenses including depreciation, etc.

The renters are flexible about WHEN to purchase the house whether it be in the next couple of months or later. Their rental agreement actually ends July 31, 2017 and so this next August 2017 will mark a complete 5 years that the house has been an official rental property. Since we will be selling at a loss, does it matter if we wait until after Aug 2017 to sell the house to them at all? I thought there was a 5 year minimum rule of some sort regarding the sale of rental property but I can't remember what that rule is.

Does anyone know if it matters to hold rental property for a minimum of 5 years if we are selling the property at a loss?

2 Responses to “I need help from a tax expert about a rental property”

  1. Petunia 100 Says:

    Maybe you are thinking about the rule to not have a taxable gain? If you have lived in the home for 2 of the 5 years immediately prior to the sale, you can exclude the gain up to 250k (500k for married filing joint).

    Your basis is the lower of cost or fair market value at the time you converted the home to a rental property. In other words, if the home was worth less than 288k at the time you converted the home to a rental, that lower value is your basis.

  2. Kiki Says:

    What is house appraisal numbers? Are you sure you will lose money on the sale? Have you already negotiated a price without an appraisal?

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