Transfer of ownership of a rental property on Schedule E

[HN]

My client rented her home in 2021 on Schedule E.  In 2022, the home was transferred from her name to her husband's company in April.  

1) How do I show only 3 months of depreciation when it is calculated for the full year?

2) Do I need to report the transfer of ownership? If yes, where? (what form/schedule)

3) For the following year (2023), can I delete Schedule E for that property?

If anybody can lead me through the steps, I would greatly appreciated it!

[Just-Lisa-Now-]

I can help with number 1.   In the asset entry worksheets for the rental, scroll down to the disposition section and input the date it was taken out of service, that will stop depreciation as of that day.

Im not sure how the transfer of ownership works, she just gave it to his company?  A gift tax return may be in order.

[Skylane]

1. Was the property jointly owned prior to transfer or individually owned.?

2. By transfer, I assume you mean the title was transferred and the deed recorded.

3. What form of company does the husband have? Does your client have an ownership interest? 
4. Was there any payment made for the property? If so, was it FMV?
5. Did they file MFJ in 2021? What will they file in 2022

Start with these…. Others will have more q’s

[HN]

1.  The property is jointly owned and the mortgage was under her SSN.

2. Yes, title was transferred and deed recorded.

3. The husband has an S-Corp.  The expenses will go to the company (interest/taxes/depreciation).

4.  No payments were made, just a transfer of ownership.

5.  They file "Married Filing Separately" for 2022 and all prior years 

[HN]

Thank you for the answer to #1!

[Skylane]

In general, and I hope you get other opinions, you can report the disposition on 4797 with no gain or loss. Then next year Sch E disappears. The asset would be recorded on the 1120s. You  would transfer the existing basis to the 1120s and continue the depreciation of the asset as well the rental income/expenses… 

Not sure I’d offer that as a definitive answer or want to do the returns … i would have plenty of unasked q’s about the particulars.

good luck

[qbteachmt]

Do these people realize the legal mess they have made, and the risks?

The house was jointly owned, but only the husband owns the S Corp? It is not advised to put Real Estate into S Corp ownership, and even worse, she just gave away her property. The mortgage is in her SSN, so the S Corp doesn't have the debt? Yet, Corporations are formed to isolate self from the business activity, so now, not only does she no longer own the property, she still has to pay for it?

All sorts of wrong, here.

[HN]

The husband is moving his business practice to the home.  His company will be taking over the monthly mortgage payments, paying property taxes, etc.  He will report depreciation, interest, taxes on it.  The debt is under the company's name now.  The home is no longer rented out.  

Do I have to record the disposition on Schedule, Asset Entry worksheet or as mentioned, Form 4797? And can you give me an example on how I would record it?