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Posted by LoTax on October 28, 2006, 6:40 pm
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rick wintomac wrote:
> After having CPA and PA give conflicting interpretation, I'm
> not sure but I think this means that:
>
> If my personal use is 20 days, I must rent it at least 200
> days to deduct expenses as a production of income property,
> i.e. deductible loss on schedule E.
When you wrote "I must rent it at least 200 days to deduct
expenses" you might be pointing to the source of confusion.
Being able to deduct expenses and being able to deduct a
loss are not the same thing. The "10% of rental days
allowed as personal use" is a condition on being able to
deduct a loss from the rental and being able only to deduct
expenses up to the amount of the rental income.
I have not had my coffee this morning, and maybe it shows in
my inability to express myself.
Try this: Unless the personal use of your rental property
is less than 15 days, or 10% or fewer of the number of days
the property is rented at a fair market rent, your *losses*
- if any - will not be allowed as a tax deduction. The
expenses of the rental - already prorated for the number of
days of rental vs. other use - or is it total days in the
year? See Bolton case - will be allowed only to bring your
net rental income down to zero (except for interest and
taxes and casualty losses - a separate issue, see
elsewhere). If your personal use days (but be sure to see
discussion of "maintenance days" elsewhere) are fewer than
15 or less than 10% of the number of days of rental, the
deduction of your expenses apportioned to the rental - if
they're larger than your income - will not be limited to the
amount of your income (this is called "loss not allowed") as
they would be if your personal use days were larger than...
This completely ignores the limitations on passive losses,
which - with a couple of exceptions - will deny you a
current deduction for the rental loss, after it's netted
with all other net passive income and losses, but suspending
the loss until such time - i.e. the future tax year - that
you have passive income or dispose of the property (in a
fully taxable disposition, one in which all the gain if any
would be recognized....
What was the question???
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