Carryover losses for newly converted rental condo

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capitalG
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Joined: Tue Mar 18, 2014 8:02 pm

Carryover losses for newly converted rental condo

Post by capitalG »

Doing my taxes for the first year with a rental property and had a question on the conversion year. We vacated our primary residence (condo) in October 2017 and moved to a recently purchased house - we started advertising the condo as a rental in mid-November but did not get a tenant in 2017. I've tracked our expenses since we vacated (prepping condo for rental, HOA/property tax/mortgage interest, depreciation) but know I can't take the loss in 2017 (no passive rental income and our AGI is too high to deduct the loss again our income). I wanted to carryover the loss to 2018 (we have a tenant in the unit now) but have not rented the condo for any days in 2017 - is this possible?

capG
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HueyLD
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Re: Carryover losses for newly converted rental condo

Post by HueyLD »

Yes you can according to the IRS.
Example 3.

You moved from your home in July. During August and September you made several repairs to the house. On October 1, you listed the property for rent with a real estate company, which rented it on December 1. The property is considered placed in service on October 1, the date when it was available for rent.
https://www.irs.gov/publications/p527#e ... 1000219036

It is highly recommended that you become familiar with Pub 527.
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capitalG
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Re: Carryover losses for newly converted rental condo

Post by capitalG »

Thanks for the response. My question is about whether I can carryover losses if despite putting the unit in service, I end up renting the property 0 days the year it is converted. In the example below, the landlord placed the rental unit in service for 3 months (Oct-Dec) and rented it for 1 month (Dec) the year the unit is converted to a rental. In our case, we placed prepared the unit for rent, placed it in service for ~2 months (Nov-Dec) but were not able to sign a tenant and rented it for 0 months. Does anyone have any experience with carrying forward losses in a situation like this?

The IRS reference below seems to indicate that I cannot carry forward these expenses unless I rent the unit at least 15 days in 2017. It seems very strange because although I have incurred significant expenses in 2017 for the rental (painting/repairing/etc), I will never be able to deduct these expenses because we did not find a tenant until January 2018.

https://www.irs.gov/taxtopics/tc415

Minimal Rental Use
There's a special rule if you use a dwelling unit as a residence and rent it for fewer than 15 days. In this case, don't report any of the rental income and don't deduct any expenses as rental expenses.
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HueyLD
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Re: Carryover losses for newly converted rental condo

Post by HueyLD »

The link you provided does not apply in your situation because your property was placed in service as a full-time rental in November based on what you wrote. That link was for people who are not in full-time rental business for their properties.

You couldn't get it rented until January and it is nothing unusual in being a few months behind between placing the property in service and getting a renter.

Yes, you can carry forward the loss from 2017.
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