So you want to landlord! Read this.

[dealmaker]

As some of you know I'm a mod on another site. I came upon the following post the other day and thought it might serve as a "learning moment" for some of us. I told him to see a CPA right now, as I'm not even sure he has a loss, in fact he may have a gain! I'm sure he didn't like that.

I also highlighted where I thought he had gone wrong. It wasn't to berate him and make him feel bad, althought he probably does, but I think he should feel good. I did it because I think that these forums aren't just for the questioner, they are for subsequent readers of the archives as well.

His post:

I had rental property (formerly the home we lived in) that was used for 3 years as investment property. After a string of bad renters and vandalism to the home by the last renter, we were forced to make necessary repairs and put the property up for sale (as we couldn't afford to make 2 mortgages without the rental income).

Before we could sell it, the mortgage company sold it, claiming it was abandoned. The fair market (or appraisal) value was approximately $15,000.00 more that the property sold for, but the sale amount was enough to cover the balance of the loan.

My question is, can I claim a business loss due to the loss of my rental property? If so, how much? Can I claim the difference between the sale price and fair market value?

Regretting the experience

OK, class is in. Does anyone want to comment on (1) his tax question, (2) my reply to his question, or (3) the many places he went wrong.

[Dan Auito]

As some of you know I'm a mod on another site. I came upon the following post the other day and thought it might serve as a "learning moment" for some of us. I told him to see a CPA right now, as I'm not even sure he has a loss, in fact he may have a gain! I'm sure he didn't like that.

I also highlighted where I thought he had gone wrong. It wasn't to berate him and make him feel bad, althought he probably does, but I think he should feel good. I did it because I think that these forums aren't just for the questioner, they are for subsequent readers of the archives as well.

His post:

I had rental property (formerly the home we lived in) that was used for 3 years as investment property. After a string of bad renters and vandalism to the home by the last renter, we were forced to make necessary repairs and put the property up for sale (as we couldn't afford to make 2 mortgages without the rental income).

Before we could sell it, the mortgage company sold it, claiming it was abandoned. The fair market (or appraisal) value was approximately $15,000.00 more that the property sold for, but the sale amount was enough to cover the balance of the loan.

My question is, can I claim a business loss due to the loss of my rental property? If so, how much? Can I claim the difference between the sale price and fair market value?

Regretting the experience

OK, class is in. Does anyone want to comment on (1) his tax question, (2) my reply to his question, or (3) the many places he went wrong.

Starting from the top, this fellow had no tenant screening and application proceedures in place so right from the git-go he is starting off on doomed footing!

Obviously he didn't create or maintain a reserve fund for unexpected repairs & vacancies, it also looks like he didn't take care of accounting proceedures to well either as the mortgage company I am sure gave him many notices of the events which would be forthcoming.

Now receipts probably weren't kept, organized and filed either or he would be well on track to creating enough deductions to account for a real loss, which it appears he will have either way. IMHO :cool:

I really don't see your reply here Dealmaker so can't comment on that, but I am sure it was filled with wise and straight-forward advice.

As for getting into his tax questions, I advise he see a CPA to take full advantage of the latest and greatest tax laws that would best favor his position regarding the finer details of his dilemma here.

P.S. Folks, Dealmaker doesn't know it yet but he is being arbitrarily promoted :SM128: :thumbup: to moderator here at Magic Bullets as well.