OWNER-OCCUPIED AND 2 RENTED STORIES

Forum|Forum|2 years ago
January 23, 2024
2 replies
12 views

Hi, the client has a three-story building with two rental incomes and received a 1098 from the lender, which includes property tax. How can I split it between Schedule A and Schedule E? Also, can I combine Apartments A and B on one Schedule E, or should I file them separately?

Since depreciation is calculated for Apartments A and B together when I combine it , if a renter moves out of either A or B and it is no longer generating rental income, depreciation for that specific apartment should cease.

Any help would be appreciated!

ProSeries Professional

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Camp1040

Level 10

Try percentages like 1/3 or take total square ft of personal and business and come up with a more accurate percentage.

Depreciation does not stop because a tenant moves out, as long as the space is available and ready to be rented.

R

Rpar

Level 3

I would keep it separate in Schedule C. If you aggregate it how do you calculate fair rental days? Another reason to keep them separate is for lender underwriting purposes, but I can't think of any other than fair rental days. You can aggregate, I'm sure the IRS won't bust down the door wanting to know why the taxpayer combined them on sch E.

Separate units would also allow him to allocate costs to each unit. As for how to allocate, sq footage is one method, or number of units, so 1/3 in this case. Number of bedrooms is possible in case the units aren't identical. You primarily need to stay consistent in whatever method you choose.

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