Harlan Lunsford <lunstax[at]belllsouth.net> wrote:

snip

- quote -

You are absolutely right that I am not addressing the
original poster's question. I was only replying to your
statement:

"Just an empty house where one could spend the night
occasionally shouldn't qualify for second residence
interest deduction."

Hopefully we can agree that this statement is incomplete.
Such a home can qualify as long as the 280A requirements are
met or it is not used at all nor is it held out for rent.
Remember your statement implies it can be occupied and has
sleeping arrangements.

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Drew Edmundson wrote:
- quote -

Things get turned here, and discussion goes sometimes on a
different track as we all know.

You and may be hung up on how we perceive this second
house/home/building.

I looked at pub 936 again, and in addition to requiring
toilet facilities, kitchen facilities, it also requires
sleeping facilities. All during this discussion I've had
in mind an unfurnished house, and still do.

If a client buys such, and does not rent it out, and does
not furnish it, or make it habitable, there's no way in he*k
I could consider it a second "home" and take the mortgage
interest deduction. I would of course question my client's
sanity and motives in buying the house of course. He could
only counter by saying it is for investment purposes. A
whole 'nother ballgame.

ChEAr$,
Harlan Lunsford

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Harlan Lunsford <lunstax[at]belllsouth.net> wrote:
- quote -

Harlan,

I have to respectfully disagree. The whole purpose of
163(h)(4)(A)(iii) is that a taxpayer can treat a home that
is not occupied for any reason as a qualified second home.

163(h)(4) Other Definitions And Special Rules

For purposes of this subsection--

(A) Qualified Residence

[snipped i and ii]

(iii) Residence Not Rented

For purposes of clause (i)(II), notwithstanding section
280A(d)(1), if the taxpayer does not rent a dwelling unit at
any time during a taxable year, such unit may be treated as
a residence for such taxable year.

-----
There is nothing in subparagraph (iii) that requires use.
The requirement in subparagraph (i) for use is the general
rule. Subparagraph's (ii) and (iii) are exceptions to the
general rule.

Regulation 1.163-10T(p)(3)(iii) says:

"If a residence is rented at any time during the taxable
year, it is considered to be used as a residence only if the
taxpayer uses it during the taxable year as a residence
within the meaning of section 280A(d). If a residence is not
rented at any time during the taxable year, it shall be
considered to be used as a residence. For purposes of the
preceding sentence, a residence will be deemed to be rented
during any period that the taxpayer holds the residence out
for rental or resale or repairs or renovates the residence
with the intention of holding it out for rental or resale."
------

In the Regulation there is also no mention that if it is not
rented it has to be occupied. BNA agrees with me:

"The taxpayer must actually use the second residence as a
residence within the meaning of the vacation home rental
rules. However, if the residence is not rented during the
taxable year, it can be a qualified residence even if it is
not used by the taxpayer."

Finally Publication 936 says:

"Second home not rented out. If you have a second home that
you do not hold out for rent or resale to others at any time
during the year, you can treat it as a qualified home. You
do **not** have to use the home during the year." [emphasis
added]

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Drew Edmundson wrote:

- quote -

Okay, since yesterday, and thanking you for your quote, I
had a chance to read your cite.

Sure, sub (iii) says if CAN be treated as a second
residence, but it still has to meet the criteria above that.
Look above at (A) Qualified residence, (i) In general, and
then (II) which says: "1 other residence of the taxpayer
which is selected by the taxpayer for purposes of this
subsection for the taxable year AND WHICH IS USED by the
taxpayer as a residence. (Caps are mine of course).

This points out the requirement that the house actually BE a
second home, that it be furnished, capable of sustaining
life (kitchen and toilet), and actually BE used by taxpayer
during the taxable year.

As we know, "a house is not (necessarily) a home". And...
"It takes a heap of living, to make a house a home."

ChEAr$,
Harlan Lunsford, EA n lA

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Drew Edmundson wrote:
- quote -

Well that certainly goes against the grain of everything
I've heard IRS say on the issue, in that the house had to be
furnished and therefore capable of sustaining life, so to
speak. Not that the beds had to be made and bathroom clean,
but certainly filled with basic amentities where a husband
could sleep when his wife threw him out; or vice versa.

I'll print this out and take it under advisement at the
office.

Thanks and ChEAr$,
Harlan Lunsford

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:

snip
- quote -


A second residence is defined under 163(h)(4)(A).
Subparagraph (iii) says if the residence is not occupied at
all then it can be treated as a second residence. Otherwise
the rules under 280A(d)(1) apply - the vacation home rules
(personal use must exceed the greater of 14 days or 10% of
rental days).

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Nan, EA in LA wrote:

- quote -

Each case is different as we all know.

but my point really involves how one can justify a house as
a second residence. Just an empty house where one could
spend the night occassionally shouldn't qualify for second
residence interest deduction.

And you got that right about California has no "lock" on
oddities. Will wonders never cease? Jacko (Michael
Jackson) is going to take the stand in his own defense?

ChEAr$,
Harlan Lunsford

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But Harlan, unless the IRS are mindreaders (and I do hope
not - my mind has sometimes contained unprintable things!)
the type of entity between purchase and rental is not
necessarily set in stone. He could change his mind, go
live in it, resell it, whatever. Probably second HOUSE
would be a better term.........and California has no lock on
oddities. I remember a case back in Massachusetts years ago
in which an older woman refused to rent her "rental" until
she found the "right" tenant. IIRS said it wasn't a rental.
The Tax Court said it was - just a picky owner.

Nan, EA in LA

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Nan, EA in LA wrote:

- quote -

OP said:

"I bought a house in Oct to rent out. We worked on it for
several months. The first rent I received was March 1.

Now, pray tell, how can this property be called a second
home? (Or is that another California thing? (grin)

ChEAr$,
Harlan Lunsford, EA n lA

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Interest and property taxes could be on Schedule A as a
second home. Rest of the expenses should be capitalized
until "placed in service". Now THAT'S a good question. I
have been taught that business use starts when the rental
is advertised as being for rent. One expects that it would
be a a bona fide availability.

Nan, EA in LA

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Rick Hess wrote:
- quote -

Quite true of course, and perhaps he started looking for a
renter after all renovations were complete about February
10th, in which case Feb 1st would be nearest month.

ChEAr$,
Harlan Lunsford, EA n LA

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"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote
- quote -


- quote -

The OP doesn't say when the house was READY to rent, only
when it was actually producing income.

Isn't the "placed in service" date the date when the
property is ready? And wouldn't the depreciation also begin
on that date?

--
Rick Hess
New Orleans
To reply, eliminate All_Spammers

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- quote -

Try the TurboTax support forums:
http://support.turbotax.com/turbotax...forumstou.html

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mk wrote:
- quote -

Uh.... glad you don't prepare taxes, Dick.

why , or how could you justify the interest on schedule a?
It's not home (personal residence) interest, and don't
qualify as investment interest yet.

As for the "repairs" on schedule c? Surely you jest. this is
not a business, but a schedule e affair after March of course. And
all "repairs" are truly renovations to be capitalized. Even if
he did get a separate credit card from HD, all interest should
theoretically be capitalized before March 1st, assuming that is when
the first renter moved in after paying in advance.

ChEAr$,
Harlan Lunsford, EA n LA

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mk <marty1[at]visi.net> wrote:
- quote -

I suspect he was just impatient, didn't see a response right
away and figured that nobody would answer.

Stu

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mk wrote:

- quote -

sorry thought I could ask tax questions here

Moderator:
I don't understand what prompted the above sentence. You
bought a house to rehab. You had interest related to the
purchase and a combination of repairs and improvements.
Since you're a cash basis taxpayer, you deduct the
expenses in the year paid.

I do not prepare taxes, but I advised someone in a similar
situation to get a Home Depot credit card and use it for
all materials. Make the minimum payments and then pay it
off as soon as he had a tenant move in.

In your situation, I'd put the interest on Schedule A and
the repairs on Schedule C. AND I would advise you to find
an Enrolled Agent or a CPA who already has rehab clients
and present all the facts and circumstances to her/him.

As for Turbo tax, there is another newsgroup for them and,
unfortunately, I don't know it.

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"mk" <marty1[at]visi.net> wrote:

- quote -

Nothing. It wasn't in service to be rented.

- quote -

More than time.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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mk wrote:

- quote -

No depreciaton till March, and no amortization of points,
either, assuming that ALL proceeds were used for
renovations.

Yes, it's time to seek help.

ChEAr$,
Harlan Lunsford, EA n LA

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I bought a house in Oct to rent out. We worked on it for
several months. The first rent I received was March 1.

I understand the difference between repairs and improvements.

I paid 1 loan origination point and another 1.38 point on
another line. What can I write off for 2004 and how -as far
as interest and repairs.

No depreciation until March???
Any idea on how to get it into Turbo tax when I had no
income from it. Is it time to seek professional help?

Lots of questions here, thanks.

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