How to report the relinquished rental in divorce

[jessicaphillipsc]

My client held a rental for half of the year and then had to relinquish it to their ex wife. I have reported the rental as sold with no gain or loss on disposition to remove the rental property. My question is a restoration that was done in 2018 before the property was relinquished. It was a $6,000 expense.  Can I report it as sold with the $6,000 loss?  What is the best way to handle this?

[sjrcpa · Accepted solution]

No gain or loss on transfers incident to divioce, The renovation cost is part of the basis. Basis is now the other spouse's.

[rbynaker]

I'd have to look up the finer points of the safe harbor, but could you elect to expense it under the safe harbor for small taxpayers?