Rental expenses while vacant and listed for sale and/or rent (which ever came first) and then rented...

Forum|Forum|6 years ago
May 31, 2019
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Last year, rental property put up for sale and/or rent (which ever came first). The rental property was rented for the first 6 months, vacant the next 3 months, and then rented for the remainder of the year.

Someone asked a similar question and someone replied to their question as it being okay to deduct all expenses since they did not sell...

However, I came across the following on this link: http://www.irs.gov/pub/irs-pdf/p527.pdf

Vacant rental property. If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you cannot deduct any loss of rental income for the period the property is vacant.

Vacant while listed for sale. If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses."

So, I'm assuming since I had the rental property available for rent while listed for sale, I cannot deduct any of the expenses I normally deduct while it's rented?

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Best answer by ThomasS

Grey area - you say the house was "put up for sale and/or rent (which ever came first)". Was the Primary intent to rent or to sell it? Matter of judgment - if primary intent was sale, then technically your conclusion is correct - "cannot deduct any of the expenses I normally deduct while it's rented".

You could also take the position there was no Primary intent either way, and as such, since it was available for rent, I would deduct all of the expenses for the whole year as being attributable to rental activity.

I hope this helps you make a decision.

ThomasSAnswer

Employee

I hope this helps you make a decision.

gclaypool19133

Employee

I don't agree. Whether the owner wanted to sell the property more than renting it is irrelevant, as long as the property was really available for rent: appearing in rental listings, having a For Rent sign, etc. The expenses are not deductible rental expenses if the property is not available for rent. Conversely, since the property was available for rent, the ordinary and necessary expenses would be deductible.