Vacant rental property and depreciation??

[R B Tax]

Hello All,

What is the best way to suspend depreciation for a vacant rental property in ProSeries?? The condo was in such disrepair that owner could not fix up and offer for rent in 2021. They continued to pay the condo fees and taxes on the property, but it was never available for rent. When I use 0 rental days you get an error of course, so I went to asset entry screen and changed the business percentage to 10%. This suspended the depreciation and i didn't use any of the other expenses. Does this sound doable to you?

Thanks,

Ray Burts, EA

R B Tax

[jeffmcpa2010]

Sounds like a reasonable approach. You may want to do a little research (I am not sure of the answer) but I think you may be able to track the carrying costs not deducted and capitalize them for use later when the property goes back in service.

[TaxGuyBill]

If (a) the entire time was due to repairing/renovating it, (2) there was no personal use, and (3) the intent was to rent it out again when the repairs/renovations are finished, I would still claim all expenses as a rental.

You may need to say the property was rented for 15 days in order to get the program to get rid of that error.

[R B Tax]

I was thinking that, but since she knew she had no monies to do any work. It's just been sitting. If she had made an attempt to do anything and even started some work and didn't finish. But she didn't do any thing.This is kind of a gray area but the pub does seem to insinuate that you need to have it at least up for rental. I guess the issue I have is what do you mean if you hold property for rental purposes ? She eventually wants to get it ready for rental but doesn't have any money.

Vacant while listed

Vacant rental property. If you hold property
for rental purposes, you may be able to deduct
your ordinary and necessary expenses (including depreciation) for managing, conserving, or
maintaining the property while the property is
vacant. However, you can’t deduct any loss of
rental income for the period the property is vacant.

[TaxGuyBill]

Yeah, while temporarily "idle" property can still be treated as a rental and be depreciated during periods of repairs, you are right, your situation seems to be a bit more than that.

[TaxGuyBill]

Unfortunately, if it truly is not a rental, then it is considered taken out of "service" for depreciation purposes.  That means whenever it is placed back in "service", you restart the depreciation from scratch, using the LOWER of (a) Adjusted Basis (don't forget to factor in previous depreciation) and (b) the Fair Market Value when placed back in service.

[R B Tax]

Thanks for your input!!

Ray