Sale of main home converted to rental property

[Dottie Fauci]

​I have a client that had a primary residence and converted it to rental property. They qualify for the exclusion with the ownership & use tests. I calculated the adjusted basis. According to Pub 523, they can exclude most of the gain but not the part of the gain regarding depreciation. And they must recapture the depreciation as well. I have that all done, but clients still insist they are entitled to the full exclusion.

[IRonMaN]

The age old saying is the customer is always right.  But that saying doesn't apply to tax preparation.  Tell them that if they wanted the full exclusion they should never have rented the place.  If they don't like that answer, tell them that they are free to leave and try to find someone that will prepare an incorrect return for them if that is what they really want.  Also tell them that cell 103 has the best view in their local federal prison.

[Dottie Fauci]

Oh how I wish I could tell them EXACTLY what I'm thinking. But I'm a professional (sometimes it's soooo hard to be professional) and I don't want to be snide or insulting. Up to this year they've been good clients. She has said she spoke to several accountants and they all say they are entitled to the full exclusion. I don't know how she was explaining the situation to them. I sent her Pub 523 page 17 and highlighted the paragraph that CLEARLY gives instructions about the partial exclusion and the recapture of depreciation - 3 times I sent it to her with numerous text messages correcting her. There's even an example in the next column saying precisely this.

If she insists on an amendment, I will tell her no and she's on her own with another tax professional - and the governments!

Thank you for your input.

[IRonMaN]

She spoke to several accountants and either talked to idiots or didn’t give the full story.  Good luck on this one!

[Skylane]

@Dottie Fauci   Your statements regarding the exclusion and recapture of depreciation are correct...

I sometimes pose a question on this forum to collect other professional opinions in support of (the bad) news.   I copy the responses show the client.  If they still want to argue, they can go somewhere else. 

[PATAX]

What sticks out to me is this statement: "She said she spoke to SEVERAL accountants". Not one or two, but SEVERAL. I agree with Iron Man's and Skylane's comments that the client is free to go somewhere else.