Best way to report property sale - intended rental property never lived in, never placed in service

Forum|Forum|4 years ago
March 31, 2022
1 reply
18 views

First time with this scenario. Client purchased a house that needed a lot of work with intent to renovate and then rent it out. Did some demolition work and some renovations, but then moved so he sold this property. While he owned it 1) he never lived in it and 2) he never rented it out, it was never ready. As you might expect, he sold it at a loss.

Since it was never placed in service, I am assuming I report on form 4797 and show depreciation as 0, because nothing was allowable when the property was never placed in service.

Agreed? Other thoughts on how to report properly? Thanks in advance!

ProSeries Professional

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Best answer by Camp1040

I would say you treat it what it is....investment property, if not then it was personal property that he likes to fix up and then no loss allowed.

Camp1040

Level 10

It never became a rental or even rentable due to condition as you stated, but the TP did have the intention of turning into a rental by his actions and deeds. I would report it on Schedule D as investment property so as to generate a loss although limited to $3000.

Since it was never placed in service, Seems like form 4797 is NOT the place to report it.

L

LimaTaxPreparerAuthor

Level 3

That is part of my debate, basically treating as section 1221 investment property, correct? ProSeries seems much more amenable to 1099-B data going to the Schedule D than something like this....

Camp1040Answer

Level 10

I would say you treat it what it is....investment property, if not then it was personal property that he likes to fix up and then no loss allowed.

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