Yahoo Answers is shutting down on May 4th, 2021 (Eastern Time) and the Yahoo Answers website is now in read-only mode. There will be no changes to other Yahoo properties or services, or your Yahoo account. You can find more information about the Yahoo Answers shutdown and how to download your data on this help page.
Trending News
Can IRS treat homes purchased for investment purposes as personal residences?
A taxpayer has 4 homes. The mortgage interest on homes 1 and 2 is deducted on Schedule A subject to the limitations. The additional interest paid above that allowable is personal interest. The taxpayer bought homes 3 and 4 strictly as investments due to the economic housing downturn. The houses are not rentals nor does the taxpayer live there or spend any time there. He is deducting investment interest expense only up to the amount of his investment income which is $15,000. The remainder is being carried forward. The IRS claims the interest on homes 3 and 4 is non-deductible personal interest and not investment interest. I cannot find anything on point in either Court Cases, Pubs, the Code or the Regs. Has anyone out there seen this issue and can you guide me to where I can find support for homes 3 and 4 being investment properties?
6 Answers
- Anonymous1 decade agoFavorite Answer
IRS treats them they way the taxpayer treats them regardless of what the taxpayer says.
- Anonymous1 decade ago
You will have an uphill battle.
The courts have ruled that even with the expectation of appreciation, this is not enough to make a house "investment property."
It's impossible to show he didn't use the houses at any time.
It's difficult to rationalize why the properties were *not* rented if the goal was to make money. After all the IRS can argue "the taxpayer cannot demonstrate investment intent because the property has income potential but is not rented."
I take it the only expense deducted was the interest expense. What about the insurance (vacant property is terribly expensive to insure)? What about maintenance, utilities, etc to carry the property?
- Ralph TLv 71 decade ago
No only the principle residence and maybe a second vacation home.
Just for investment purposes is under a different set of rules.
If he was renting them out,the taxes and interest would be claimed under business expenses.
- ?Lv 45 years ago
in case you're renting out the valuables you're refinancing, it truly is going to be seen an investment belongings. in case you're no longer renting it out, it truly is going to be seen a 2nd domicile, because you quite stay in a different state. some loan brokers could inform you which you would be able to declare this as your universal place of residing, because you do no longer very own yet another belongings, yet while the underwriter sees which you artwork in a different state, it truly is going to be the two an investment or 2nd domicile.
- travelguruetteLv 61 decade ago
You could only deduct the interest if they were rentals. Only business related is where it can be deducted. Investment is not.
- Helen, EA in PALv 51 decade ago
While I agree with you, no one here is probably going to do the research pro bono.
If you are member of NATP or NAEA, both have research services available. I don't know if you can use it if a non-member, but it does not hurt to ask if so and what is the fee.
Try www.natptax.com or www.naea.org
Helen, EA in PA
