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Posted by Ray on April 3, 2007, 2:07 am
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My daughter began renting her house in November of 2006. In
addition to two months of rent, she received a deposit equal
to a month's rent.
How is this deposit handled?
Is a Schedule C the best way to handle the rent income?
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Posted by Frederick Lorca on April 3, 2007, 7:23 pm
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> My daughter began renting her house in November of 2006. In
> addition to two months of rent, she received a deposit equal
> to a month's rent.
>
> How is this deposit handled?
>
> Is a Schedule C the best way to handle the rent income?
Her gross rental proceeds include the deposit. The rental
income and expenses are reported on Schedule E. For more
information, see IRS Publication 527.
http://www.irs.gov/pub/irs-pdf/p527.pdf
Frederick Lorca
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Gil Faver on April 5, 2007, 2:08 am
Please log in for more thread options >> My daughter began renting her house in November of 2006. In
>> addition to two months of rent, she received a deposit equal
>> to a month's rent.
>>
>> How is this deposit handled?
>>
>> Is a Schedule C the best way to handle the rent income?
> Her gross rental proceeds include the deposit. The rental
> income and expenses are reported on Schedule E. For more
> information, see IRS Publication 527.
>
> http://www.irs.gov/pub/irs-pdf/p527.pdf
I hope I cut and pasted correctly. I don't kow how leases
are normally worded, but if the security deposit is to be
returned (absent the tenant's failure on some part), then
the security deposit is not included as income when it is
received (i.e. when the lease begins). Do leases still call
for "last month's rent" instead of a "security deposit". I
suppose some do . . ..
Security deposits. Do not include a security deposit in your
income when you receive it if you plan to return it to your
tenant at the end of the lease. But if you keep part or all
of the security deposit during any year because your tenant
does not live up to the terms of the lease, include the part
you keep in your income that year. If an amount called a
security deposit is to be used as a final payment of rent,
it is advance rent. Include it as income when you receive
it.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2006) - All rights reserved. >>
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Posted by Ray on April 9, 2007, 3:10 am
Please log in for more thread options Thanks Frederick, for this and other advice as well.
One more quick question:
Am I correct that it's a toss-up as to whether my daughter depreciates the
house she is now renting? Whatever she saves now would be lost later with
recapture when she sells the house.
-- Ray
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by L K Williams on April 12, 2007, 12:25 am
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> Thanks Frederick, for this and other advice as well.
>
> One more quick question:
>
> Am I correct that it's a toss-up as to whether my daughter depreciates the
> house she is now renting? Whatever she saves now would be lost later with
> recapture when she sells the house.
No, you are not correct. When she sells the property, her
adjusted basis for calculating gain or loss is the cost
less depreciation allowed OR ALLOWABLE. In other words, she
must reduce her cost by the depreciation she should have
claimed! AND, the unclaimed depreciation (allowable
depreciation) is still subject to recapture.
There are ways to minimize the effect of the reduction in
basis for allowable but unclaimed depreciation. But, the
recapture rule doesn't go away.
Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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