Assume instead he sold it to Terrance on 9/1/2009. Terrance
paid $20,000 in cash and took out a mortgage for $580,000.
the property as rental property.
What is the basis of the property to Terrance?
Can Terrance depreciate the building?
Does Terrance depreciate $20,000 or $500,000?
Is there any limit on the amount of depreciation?
Is there any limitation on net rental income to
Net rental loss
Wayne sold rental property that he owned (He sold no other
1231 property during the year).
On 1/1/97 the purchase price was $500,000.
The value of the land was $100,000 and of the building was $400,000.
made a down-payment of $150,000 and borrowed $350,000.
On 4/1/2001 he
added a swimming pool and hot tub for $80,000.
Prior to the sale he had paid
off $25,000 of the mortgage.
He sold the rental house on September 1, 2009.
$25,000 in selling expenses. In addition he paid a painter $5000 to paint the
rental property prior to sale.
The purchaser assumed the mortgage and paid
him an additional $150,000 in cash.
What is Wayne's gain for 2009?
Mortgage relieved of
Less selling expenses
Cost Basis of house
Cost basis of pool and tub
Total basis of house
*Depreciation on house
*Depreciation on pool and tub
Less excluded gain