Sale of Vacation Home Rental

Depreciation that was never used because it was never allowable is not allowable depreciation.

Let's start over. Did the taxpayer use the Hawaii property for personal purposes for more than the greater of 14 days or 10% of the number of days the property was rented?

I very much want to believe that statement: DEPRECIATION THAT WAS NEVER USED BECAUSE IT WAS NEVER ALLOWED DUE TO INCOME LIMITATIONS IS NOT ALLOWABLE DEPRECIATION. that is my thoughts as well.

Yes, the taxpayer used the home as a rental and as a personal vacation home. many times the rental would be 65 days over a year and personal used 100 days, the rest it would sit empty. this was most frequently the case, rented max 115 days out the year and used around 100 days in a year.

the average rental income was about 130k per year and expenses such as dues, fees, utilities, maintenance, memberships etc were about 140k per year, we never got to depreciation if you consider the descending pecking order.

we never got to depreciation if you consider the descending pecking order.

THAT'S THE KEY! Never any "allowable" depreciation.

Based on the number of days used for personal purposes by the taxpayer, it appears this property is to be treated as a "residence" for purposes of applying the several tortuous deduction limitations found in IRC Section 280A.

Please note, however, the very carefully crafted exception from personal use for "repair and annual maintenance days" as found in Section 280A(d)(2)(C)...

I have highlighted and underlined the part of your response that does not make sense to me?

The IRS's "rule" is that depreciation, allowed or allowable, whichever is greater, reduces basis, n'est-ce pas? If more was allowable than the amount that was actually taken ["allowed"] then the greater amount, which includes some depreciation that wasn't allowed, is supposed to reduce tax basis, according to the IRS rule, as I understand it.

Does "Basis is required to be adjusted (reduced) by the amount of depreciation that the law allows you to take, or the amount of depreciation that you took, whichever is greater" make any sense to you?

I have highlighted and underlined the part of your response that does not make sense to me?

Didn't make any sense to me either. I see no evidence in the case of a rental subject to 280A limits such as in the scenario in this thread, that depreciation which was allowed was not taken, nor that depreciation which was not taken, was allowed.

Maybe when I wrote "If more was allowable than the amount that was actually taken ["allowed"] then the greater amount, which includes some depreciation that wasn't allowed, is supposed to reduce tax basis," I should have written "If more was allowable than the amount that was actually taken ["allowed"], then the greater amount, which includes some depreciation that wasn't taken, is supposed to reduce tax basis."

That's the general rule, as I understand it. I struggle to explain it effectively and accurately.

Basis is to be reduced by the depreciation allowed or the depreciation allowable, whichever is greater, according to IRS.

In the facts of the Hawaii vacation home, on the other hand, I see no depreciation allowable, no depreciation taken, and none reducing basis.

I have reached the same conclusion. No depreciation was allowed based on income limitations although the depreciation was allowable under the right financial conditions as set forth in the tax statute. Since no allowable depreciation was allowed, there is no reduction to basis and no recapture to the extent it would be application on assets other than the real estate that was at issue in this case.

thank you for your perspectives, I was helped significantly.

Szobo, I'm afraid some of us still don't understand "...although the depreciation was allowable under the right financial conditions as set forth in the tax statute."