Dick wrote:

[...]
- quote -

I saw one of those once, on a museum tour in the Oakland
hills...

"coach house - a small building for housing coaches and
carriages and other vehicles"

-Mark Bole

Moderator:
East of the Mississippi, a coach house is a multi-car
garage with and apartment above it.

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Dick Adams wrote:

- quote -

Dick, I see no problem with this as long as they make the
move complete and change their voting record and driver's
license, etc. addresses.

Missy Doyle

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

We were having dinner with friends last week. He rehabs
houses and was searching for a way to reduce his taxes on
the profits. After getting some answers, I said I'd get
back to him.

They have been living in their primary residence over 20
years, own it outright (though often used for home equity
loans), and their children are out on their own. However,
his parents live with them in an in-law apartment and his
mother and his sister run a daycare center on the ground
level of the house. So he is averse to selling the house.

The rehab project he is about to undertake will take about
18 months. He will do most of the work contracting out the
electricity and the plumbing. The project is a single
family home that has a coach house. He expects to sell it
upon completion and recognize a net profit of over $400,000.
He has been doing rehabs for over 10 years. This is not
his first residential rehab, but it is the first that will
take more than six months.

He has contracted to purchase the property, but will not be
starting work on it until April because he has a rehab not
yet finished.

The advice I want to give him is:
- Rehab the coach house first;
- Move into the coach house and keep meticulous records
of nights they spent there together (I'm thinking of a
daily diary);
- Prioritize work so that they can move into the main house
before outside work, including landscaping, is started;
- Complete the project;
- Sell it after he can document at least 731 nights they
both slept there.

My take is that the 731 day clock starts when they occupy
the coach house. If audited, I perceive the issue to be
complete, contemporaneous records and their developing
relationships in the neighborhood. Any disagreement there?

The major problem I see is that expenses have to capitalized
into the house and, thus, are not deductible on his 2006 and
2007 tax returns. But his tax savings will be over $100,000
in 2008.

Dick

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >