hfsllc
Level 2

I have a new client who rented a property to a third-party through mid-2018. From that point on, the property was occupied by a family member who did not pay rent. The family member moved out summer of 2019. The property was for about 1 year before the client moved back into the house. The client sold the property at the end of 2021. This now raises the question of whether or not he can claim the property as primary residence two years out of the last 5 years. To make matters worse, his tax returns were prepared by one of the big box companies, they did no compute depreciation on the rental property; at least not that I can see back to 2018.

Question -  is based on the fact that no rental expense and income were included on 2020 tax returns, can it be construed that the property became primary residence starting mid-2019? Otherwise, how does one treat a vacant property?

 

Thank you

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