rental property converted to personal residence

[charleneff]

Client had rental property for two years. Then sold personal residence due to health issues and moved into rental. How do I report? What do i use for purchase price on deprec schedule? 

[GodFather]

When during the year did your client move into the rental property?  Was it for the entire year or some portion of the year? 

Up until the time your client moved in, you would have rental income and expenses, and you would reflect that activity on the Schedule E as you normally would.  The Schedule E has an input for the number of days it was rented and the number of days it was used personally.  Fill that information in.  

From the point the client moved in, the property became personal use and there is no further Schedule E reporting.  One important fact is to make sure if the property is ever sold that you recapture the depreciation taken. 

[TaxGuyBill]

Leave the purchase price blank.

If the rental property was converted to personal use, on the Asset Entry Worksheets, go to the disposition section and only enter the date it was converted to personal use.  Leave the sales price blank.  That will stop the depreciation.

As was noted by GodFather, enter the rest of the rental income and expenses for the partial year and whenever the property is eventually sold, the sale will need to factor in some things.

[Skylane]

Not sure if the number of days rented will work or not but you might just enter the income/expenses until the date of TP changed it to primary use. You can calculate depreciation by using the date sold  for the partial year and then enter it manually onto Sch E.  When you're finished with the return change the  business use % to 0.01 % so that the software doesn't automatically calculate depreciation but the asset will stay on the books and you'll have records if the property is sold. You'll probably have to play with the software to make the return come out correctly.