Mortgage interest on vacant rental property listed for sale

Forum|Forum|6 years ago
December 7, 2019
1 reply
21 views

Taxpayer stopped renting his rental property 7/31/17. Rental property was vacant 8/1/17-10/10/17 and sold 10/10/17. Can taxpayer deduct the mortgage interest on vacant rental property from 8/1/17-10/10/17 on Schedule E?

Taxpayer already has two other homes which use up all of the interest deduction on Schedule A,.

So, the interest on the former rental property vacant pending sale 7/1/17-10/10/17 can't go on Schedule A as you can't deduct interest on a 3rd home.

Is this investment interest for the period vacant and pending sale?

Lacerte Tax

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Best answer by itonewbie

We were not clear in your question but I assume the property was taken off the market as of 8/1/2017 and was not available for rental during the intervening period.

Since the rental property constitutes a passive activity under §469 and should, prima facie, not meet the de minimis exception under the regulations given the amount of gross income that would have received during the year, it cannot generally be treated as an investment property for purposes of §163.

In the past, otherwise deductible expenses incurred in relation to the retired rental property pending a sale may be deducted under §212 but 2% miscellaneous itemized deductions under §67 have since been suspended under TCJA.

itonewbieAnswer

Level 15

We were not clear in your question but I assume the property was taken off the market as of 8/1/2017 and was not available for rental during the intervening period.

Since the rental property constitutes a passive activity under §469 and should, prima facie, not meet the de minimis exception under the regulations given the amount of gross income that would have received during the year, it cannot generally be treated as an investment property for purposes of §163.

In the past, otherwise deductible expenses incurred in relation to the retired rental property pending a sale may be deducted under §212 but 2% miscellaneous itemized deductions under §67 have since been suspended under TCJA.

---------------------------------------------------------------------------------Still an AllStar

A

accoun5Author

Level 5

Thanks so much. The buyer paid the seller early occupancy on escrow from 10/1/17-10/10/17 sale. Since it was rented for early occupancy to the buyer, can 100% of the mortgage interest be deductible on Schedule E?

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