LB wrote:

- quote -

Yes. And yes, but it's not called "recapture".

First, any depreciation, other than on the structure, is
recaptured as ordinary income to the extent deducted as
rental loss, so that it can be completely ignored.

To the extent of the capital gain, the 10 months'
depreciation on the structure is taxed (on Schedule D) at at
most 25% as unrecaptured section 1250 gains. The remainder
of your gain is subject to the $250,000 section 121 capital
gains exemption.

I don't know if you need a tax advisor, but it may be a good
idea to get your rental income/loss (1040 Schedule E) in
order. The capital gains part is relatively simple.

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- quote -

Yes, the depreciation is subject to recapture. Assuming you
rented the property for profit, report your income and
expense on Schedule E of your tax return. If you've
incurred a loss on the rental, it may be deductible from
your gross income.

Intent is important here. If the property was not put into
service with a profit motive, you may deduct your expenses
only to the extent of the income it produced. In that case,
you would report the income on line 21 of your tax return
and carry the expenses, not to exceed the income, to
Schedule A (Form 1040) "Itemized Deductions".

There is a worksheet on Page 24 of the following publication
which will help you:

http://www.irs.gov/pub/irs-pdf/p523.pdf

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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preparing for 04 tax return with home sale and Rental
depreciation

I have owned and lived in a house for 4 years, then rented
it out January 1 '04 then sold it to the renter, closing on
10/28/04.

I qualify for the capitol gains exemption as I have lived in
it 2 consecutive years.

Should I/do I have to claim depreciation on the almost 11
months? And the recapture since I sold it?

Any issues or complications I should be aware of?

Thanks,

LB

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