Property rented 2016-2019, for 2020-21 I just didn't enter it, now how do I claim expenses for 2022? Want to do 1031 exchange

Forum|Forum|3 years ago
March 4, 2023
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We own a condo, it was purchased as a rental. It was rented from 2016 thru 2019. In 2019 our child moved in and paid below market value rent, basically just covered the taxes and HOA so I figured I couldn't claim the rental expenses. I want to sell it and do a 1031 exchange. I'm unclear if I had to have rented it for a portion of this year and last to do the 1031 so I was going to claim some rent this year anyway. I don't know how to pick up where I left off in turbo tax with the depreciation. I didn't claim any expenses or depreciation for 2021-22. Basically I treated it like it was either vacant, or personal use. I just took it off my return completely. Not sure what to do. I really want to keep the 1031 exchange option because the cap gains would also hit my healthcare subsidy! I would probably keep it as a rental if I can't 1031 it. I don't know what to do with my 2022 taxes. One 1031 company (I gave them brief details in email) said this "

. As long as it is not your primary residence, and you have not been using it personally for more than 14 days per year then regardless of income it is qualified as an investment property and eligible for a 1031 exchange." What is considered personal use? If it wasn't rented and we, the owners, didn't live there is that considered vacant? HELP!

RobertB4444

As long as your son was not a dependent on your tax return then you have no personal use of the space. You can classify it as property held for investment and get the depreciation schedule from when you last used it as a rental property for the 1031 exchange company.

If your son was a dependent on your tax return then all of his time there was personal use by you and the house doesn't qualify for a 1031.

@cindywhitall

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cindywhitallAuthor

Thanks for responding, I'm afraid I have complicated this though... Son was definitely not a dependent.

I spoke to a 1031 exchange company and the person said that the IRS might ding me for depreciation I DIDN'T take, BUT COULD HAVE ,if I don't do the exchange. She also said that as long as it wasn't my PRIMARY residence that it would still be an investment property and that I didn't have to rent it (which is what you just said.)

I did more reading and apparently she might be correct about the depreciation that I didn't take so I looked back at my taxes and I don't see a schedule E for that property. Now I'm worried that I may have "converted it to personal use." I read a thread that says this...which I'm afraid I might have done " "I did not rent or attempt to rent this property at all in 2019. If you do, then you'll be FORCED to delete the SCH E. Do that, and you're screwed."

I guess it's 2 questions. Will the IRS ding me for depreciation I didn't take it I don't do a 1031? I don't care about if I can do the 1031, I probably wouldn't bother to go back and add it.

OR will they not ding me for it if I chose the but say it was personal use and disallow the 1031?

I posted a new question about whether and how I should amend my returns for 2020 and 2021 to put the property back on schedule E. I tried to do it, but there's no option for that property so I don't know if I somehow dropped in in 2019 (which I did claim 6 months of rent) or if the program just isn't seeing it to bring it back.

AmyC

Employee

1. The IRS will have you subtract depreciation allowed or allowable. However, since the second home, an investment property, was not being rented at fair value, you could not claim expenses, including depreciation.

2. Since this is an investment house, you qualify for the 1031 and will only claim depreciation on the years that it was rented at fair value and depreciation claimed.

3. Once a property is deleted, you have to manually enter all information again. However, there is no need to add the property back and amend the 2021 and 2020 returns if your son was living there independently and paying less than fair market value.

See Like-Kind Exchanges - Real Estate Tax Tips - IRS.

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