rental property calculation?

Question

Sue has residence with adjusted basis of $200,000 and a FMV of $150,000; later sue decide to convert the resident into a rental property; once year, later taking the depreciation of $15,000, she is considering selling the property. Determine the results if she sell the property for $130,000. or $165,000

if the property selling for $130,000:
to me i think the answer is: $200,000 - $15,000 = 185,000 adjusted basis
130,000 - 185,000 = -55,000 realize loss which can deduct against taxable income;

if the property selling for $165,000:
same basis $185,000, $165,000 - $185,000 = - $20,000 recognize loss against taxable income

is the above correct? please correct me if i am wrong; and also when you convert a home resident to a rental property is there anything particular need to becareful with?

Answer 1

unless you are a bona fide real estate processional a capital loss is not deductible on a personal income tax return (rental or not)...... the depreciation taken in prior years would be required to be recaptured this would result in additional income to be reported on the return. the income may consist of capital gain and/ or ordinary income (section 1245 and 1250, possiblly section 1231). once a home is converted to business property it changes the dynamics immensely and should never be done by a lay person without serious consideration and consultation with a tax professional to determine the tax implications in your particular case. (every one is different and every financial decision such as this has many implications.

Answer 2

What State is this in?