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Rental Property Questions
Submitted by dank104 on March 19, 2008 - 10:23am.
Hi, My brother and I purchased (50% each) a home in 2006 and started renting it out in Jan 2007. My brother lives in the house with a few roommates and I don't live in the house. How should we file our taxes? I would like to split everything half half, but I'm thinking it's more complicated since I don't live in the house and my brother does. How would depreciation factor in? Any help would be great!          GuG-Points: 1237 Last Seen: 08/24/2008 - 3:50pm I am: The walrus koo koo kachoo     GuG-Points: 5743 Last Seen: 08/28/2008 - 9:06pm Location: Lost in Cyberspace..... I am: Not really paying attention Re: Rental Property Questions
March 19, 2008 - 11:29am
Is the houses in your name(s) or did you incorporate them? I only ask because I have a couple of rental homes and I have each of them in separate corporations (there in "C" corps.) for my personal protection. If there in your private names then that is something you might want to think about. I am in no way a tax expert and the girl who normally chimes in isn't on line but I'll send her a email that there is a question in here for her (I use to do that when I was a moderator). You might want to add what state you are in so that she can better help you (not sure if that matters).
GuG-Points: 1237 Last Seen: 08/24/2008 - 3:50pm I am: The walrus koo koo kachoo Re: Rental Property Questions
March 19, 2008 - 4:06pm
In agreement here with smartmom on how she is handling her situation. However, dank104, yours is a bit different. The best I can do for you is to forward you to the IRS website, but I am pretty sure you are going to need to seek "legal" tax advice and go through a professional tax service to file your 2007 tax return. So, my advice to you, for the protection of you and your brother, is to find a CPA/EA/Licensed Tax Agency for this first year of renting out the cooperatively owned home. I'm wondering how this purchase was treated for the year of 2006. There are too many variables to be able to say....."Here dank, here's what you should do."
Pub 527 Residential Rental Property Pub 936 Home Mortgage Interest Deduction Pub 530 First time homeowners information
The list above will be a good start. Each publication will have other available links that may pertain to you.
LynnH
If I was standing on a fish, I'd slip and fall......  GuG-Points: 5332 Last Seen: 08/28/2008 - 9:09pm Location: ♛ My Castle, of Course! ♛ I am: Legendary Re: Rental Property Questions (LynnH)
March 20, 2008 - 6:30am
thanks everyone for your replies! it's much appreciated. for what it's worth, the rental property is in PA and both of us are legal owners of it. my main concern is what will happen when it comes time for us to sell this property. my brother will have lived in the house 2 out of 5 years so he won't be taxed on the capital gains (hopefully we are able to sell it for a profit), but if we split everything half half now for tax purposes, i might get taxed on the capital gains later since it'll be a rental property for me. i'm thinking maybe it might be better if my brother claims the whole property himself now so that we won't be taxed on any of the gains later. waiting on the tax goddess! GuG-Points: 5743 Last Seen: 08/28/2008 - 9:06pm Location: Lost in Cyberspace..... I am: Not really paying attention Re: Rental Property Questions (LynnH)
March 20, 2008 - 3:32pm
OK I just wanted to throw in something to think about. I don't know if you and your brother are in the rental property as a investment to flip and do again. I know that some are into flipping. If you are into that and don't want to be hit up on all of the capital gains which can be very heavy then you might want to think about (down the line) a 1031 Exchange. What it does is allow you to flip the money from one piece of property to another piece with out paying the taxes. I only mention this because it might be something to talk to your CPA about prior to deciding who gets to claim what. You can read more about what a 1031 Exchange is here: How To Complete a 1031 Tax Deferred Exchangeon the IRS site you can read about it here: Like-Kind Exchanges - Real Estate Tax Tips
FYI I have done 1031 Exchanges in the past and they are great in saving you all of the taxes. But like LynnH stated you should talk to a CPA first!
GuG-Points: 1237 Last Seen: 08/24/2008 - 3:50pm I am: The walrus koo koo kachoo Re: Rental Property Questions (dank104)
March 20, 2008 - 7:30am
dank104 ~ Please look at the thread above by LynnH. You are going to have to obtain 'legal' advice in this matter. I can't give you that. But I did supply you with a few publications in that post to get you started so you will have a little information, which may prompt you with some questions for when you do 'obtain' someone. What you do now will affect the future, just as you stated, regarding gains. Here is a link to Pub 523 Selling Your Home. It includes important information and an "Ownership and Use Test", which you must adhere to. Please look at that test carefully and answer those questions. Lynn (not really a tax goddess
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