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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55604
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I bought a home in 2014, declared to the mortgage company

Customer Question

Hello, I bought a home in 2014, declared to the mortgage company that it would be an investment property. However, rather than renting it out, or using it as a business, I lived in it for two years. During that time i put in $100,000.00 in upgrades, to make it an equestrian property..for my horses, not a boarding stable. I sold the property in 2016 for the same amount I bought it at in 2014. Hence, I took a 100K loss. Question: may i claim that 100 K loss on my taxes.
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: just what Ive typed
Submitted: 5 months ago.
Category: Tax
Expert:  Richard replied 5 months ago.

Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

Expert:  Richard replied 5 months ago.

You could still take the position this was an investment property. Some taxpayers in this situation take the position this is "investment property" and thus a loss on sale would be considered a capital loss from the sale of investment property. Treating it as investment property would allow a deduction of the loss to offset any capital gains for the year and then up to $3,000 of other income. Any unused portion could then be carried over to future years. But, this would be a very aggressive approach given the case of Moore v. Comm., T.C. Memo. 2007-134 (2007). In that case, the Tax Court ruled that holding property solely for appreciation wasn't sufficient to support a classification as investment property. So, if the IRS were to challenge your position on the loss, you could expect them to contest your classification of this as investment property.

This is the part of my job I don't like...when the law is not in favor of my customer. I wish I could tell you that you could take the full deduction, but, I can only provide you information based on the law so that you can act on the best available information to you. ………..I wish I had better news, but can only hope you recognize and understand my predicament and don't shoot the messenger. I'm sorry!

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