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  • 1.  Loss on sale of coop

    Posted 01-22-2021 12:00 PM
    Client buys a coop in NYC several years ago. His adult daughter lives there. He has been deducting real estate taxes and mortgage interest on Schedule A.
    2020 return has not been done yet.

    Market value of coop has gone down .If he sells now ,with all the closing costs, he will lose $80K.

    Can he deduct loss on 2021 return?

    Should he prepare a Schedule E on his 2020 return and show it was a rental property, and then take the loss on 2021?If so, does he get the whole loss in 2021 or just $3,000(assuming no cap gain).

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    Gerard Mulligan
    CPA
    MULLIGAN & GROTE, CPAs PC
    Floral Park NY
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  • 2.  RE: Loss on sale of coop

    Silver Most Valuable Member
    Posted 01-23-2021 07:25 AM
    Gerard,
        No deduction on the 2021 return.  Apparently he never treated the co op as a rental property if he deducted the taxes and interest on Schedule A.. He would have to have rented the property for more than one year to take a loss. Since it is not business property and considered a second home, the loss is not allowed.

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    Peter Hall
    HALL CPA GROUP
    Kings Park NY
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    Original Message


  • 3.  RE: Loss on sale of coop

    Posted 01-24-2021 09:45 AM

    Even with conversion to Sch E rental you may not have a loss:

    The IRS uses a home's value at the point of conversion as the basis for determining a gain or loss.

    Careful:

    It's possible for a loss to be disallowed when the rental period is for less than one year. The IRS can take the position that the seller's conversion of the residence to rental property was only temporary, not permanent.

    IRS guidelines for home sellers warn that the rental should be "expected to last more than one year." The guidelines on what's temporary and what's permanent are by no means the final word, however. They merely reflect the official IRS position on an issue and are not necessarily binding on the courts.4

    Nor will the IRS consider a personal residence to have been converted to a rental property for any days your property is up for rental but not actually rented. Translation: You have to actually rent the home out before you can take a loss deduction. If it's not being rented, the house is still considered your personal dwelling. This limitation has been upheld by the courts



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    Marvin Gruza CPA
    Flushing NY
    718 263 3025
    cpamarv@aol.com
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    Original Message


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The opinions expressed are the views of the author alone and should not be attributed to any other individual or entity and shall not constitute an accounting opinion.