sethb[at]panix.com (Seth Breidbart) wrote:

- quote -

That was the former rule under the old statute. But under
present section 121 it appears not to be the case. The way
the statute is drafted it looks like only actual
depreciation recapture does not qualify.

I couldn't find any IRS regulations about how to deal with a
home office under section 121. But what there is indicate
that the statute means you recapture depreciation and that's
it.

Stu

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David Woods <davidwoods[at]verizon.net> wrote:
- quote -

But if there's a profit on the sale, the portion due to the
home office is not excludable under the "residence"
exemption. However, if there's no home office in the year
prior to the sale, then the entire profit (up to the dollar
limit) is excludable, right? (This is after recapture of
depreciation in any case.)

Seth

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"Seth Breidbart" <sethb[at]panix.com> wrote:
- quote -

Wholly irrelevant. You're taxed on the prior depreciation.
When you do and don't have a home office does not change
that.

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

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Anyone who has taken a home office deduction in the past
without deducting depreciation on the building should
consider a change in accounting method to duduct in the
current year ALL the depreciation not deducted in earlier
years. This change does not require IRS approval.

For more information start at chapter 1 of IRS Publication
946, How to Depreciate Property. Look for the section, "How
Do You Correct Depreciation Deducions?"

Regards,
Bill

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sethb[at]panix.com (Seth Breidbart) wrote:

- quote -

It used to be that the portion of the house used as an
office didn't qualify for the profit roll-over provisions
when reinvesting proceeds from the sale of a residence and
buying another. But if you ceased using the home office
before sale, then the entire proceeds qualified for the
roll-over exemption.

Under the current law I wouldn't think it would make any
difference, though.

Stu

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Bill <an_ordinary_guy_158[at]hotmail.com> wrote:
- quote -

To what extent is the "last year loophole" still available?
That is, if you don't have a home office in the last year
before the sale, what happens?

Seth

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Steve Pope <spope33[at]speedymail.org> wrote:
- quote -

If you claim that you did not meet the home office deduction
rules, no one is going to challenge you and claim you did.

Also, you did not take a home office deduction.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Stuart A. Bronstein <spamtrap[at]sbcglobal.net> wrote:

- quote -

What does this mean in practical terms?

If the TP claims no part of their house met the exclusive
use test, therefore no deduction was available, will the
IRS actually challenge that and if so, what will the IRS
use for evidence?

Steve

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gerry <gobeyondgobeyond[at]yah00.c0m> wrote:

- quote -

No. The IRS changed the rule in 2002, but you cannot exclude
the portion of the gain equal to depreciation allowed or
allowable

The following if from URL
http://www.irs.gov/faqs/faq-kw113.html

"I have a home office. Can I deduct expenses like mortgage,
utilities, etc., but not deduct depreciation so that when I
sell this house, the basis won't be affected?

If you qualify to deduct expenses for the business use of
your home, you can claim depreciation for the part of your
home that is a home office. Generally, the part of your home
that is a home office is depreciated over a recovery period
of 39 years using the straight line method of depreciation
and a mid-month convention. If you do not claim depreciation
on that part of your home that is a home office, you are
still required to reduce the basis of your home for the
allowable depreciation of that part of your home that is a
home office when reporting the sale of your home. For more
information, refer to Publication 587, Business Use of Your
Home."

NOTE the above: "you are still required to reduce the basis
of the home for the allowable depreciation", even if you did
not take it, so be sure to take it.

For details search Google for "Home Office" Drepreciation
http://taxguide.completetax.com/text/Q13_2732.asp
http://www.thestreet.com/funds/taxforum/897003.html
http://www.bankrate.com/brm/itax/tips/20010321a.asp
IRS Form 8829

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hi terry. if you claim the home office deduction and later
sell your principle residence, you will have to recapture as
income the depreciation you claimed as a deduction. thats
all the income you will have to pickup from the home office
even if you sell your house for a substantial profit. you
dont prorate the gain between business and personal like you
used to a long time ago. all you do is pickup the
depreciation as income. as for selling your principle
residence at a gain, you are entitled to exclude $500,000 of
the gain married filing joint or $250,000 of the gain for
single as long as this was owned and used as the princple
residence for at least 2 out of the previous 5 years up to
the date of sale. hope this helps.

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Terry <gobeyondgobeyond[at]yah00.c0m> wrote:

- quote -

It works like this. You get depreciation on the portion of
the house you claim as your office, so that reduces your
taxes. If you sell the property for more than your basis,
you have to recognize (recapture) the depreciation deduction
that you earlier took.

That is to say that you got a deduction for the property
having a lower value, but it really went up in value. So
you have to give the money back.

By the way, the rule requires recapture of depreciation, if
available, whether you take it or not. So if you don't want
it, check with your tax pro to be sure your office doesn't
qualify as a home office.

Stu

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gobeyondgobeyond[at]yah00.c0m (Terry) asked:

- quote -

It's true: when you sell your main home, you will not be
able to exclude that portion of your profits which are equal
to the business deductions taken. For full information, you
could review Pub 523.

[A brief discussion appears in Pub 17 for 2005, on page 103
(headed Business Use or Rental of Home.]

The general issue is known as "recapture." And the concept
is, that anything you used to secure a tax advantage, should
ultimately be repaid from your proceeds of sale.

Bill

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You might owe taxes even if you don't take the depreciation.
From today's (Jan 14) New York Times "Depreciation
Appreciation 101" by Damon Darlin:

....[quoting the I.R.S.'s Nancy Mathis] 'Even if you don't
take this depreciation, it will be treated as if you did
when it comes times [sp] for calculating the basis of the
home sale and capital gains exclusion.'...

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"Terry" <gobeyondgobeyond[at]yah00.c0m> wrote

- quote -

Yes, any gains on the sale of the house will carry some % of
gains attributable to the home ofice that you took
depreciation deductions on.

Luckily, the expense taken for depreciation of the home
office off-sets ordinary earned income that is subject to
both income tax as well as self-employment tax. While the
gains (if any) are taxed at a capital gains rate that should
be much lower.

The home office designation also allows other deductions and
expenses to be taken (like a % of utilities, incurance,
repairs, etc.. Those types of expenses are not allowed
~unless~ you have a qualaifying home office.

- quote -

There are many times it's not worth the deduction, given the
small size of the space used for business in relation to the
whole house. But it is worth looking in to to determine the
facts before you discount it outright.

--
Paul A. Thomas, CPA
Athens, Georgia

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I own a 2-bedroom home. I use one of the bedrooms as my
business office. Is it true that if I claim tax deduction
for my home office and I sell my home in the future for more
than I paid for, IRS will want a part of that profit? If
true, this sounds like a real pain and I am not sure if it
is worth the deduction. Can anyone advice me on this or
point some good resource on the web?

Thanks in advance!

Terry

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