[gomoho]

I am proposing this scenario:

You are selling an investment property you have held for almost 10 years. The market in the area you are selling never recovered. Disregarding everything about depreciation etc. the question is -- if you sell the property for $20k less than you paid for it would that be considered a capital loss -- similar to when you sell a stock investment and lose money on that.

Please don't suggest talking to a tax man - not in a place or position I can do that. Just looking for someone that may have had this situation in their personal experience.

[pbkmaine]

http://www.irs.gov/pub/irs-pdf/p527.pdf.
This should help you if it's residential rental property.

[gomoho]

Thanks for the link PBK, but didn't answer my specific question.

[gomoho]

I may have answered my own question - actually getting the advantage (if you can call it that) because I won't be paying any capital gain when the depreciation needs to be recaptured; however, I am sure that saving won't come close to the $20k lost.

[l2ridehd]

You really need to look at how you have handled this rental property each year on your taxes. Almost all renal properties show as a depreciating asset each year of ownership. As an example lets assume the property is worth 350K and has been rented for 10 years. On your taxes each year you depreciate the value of the building each year. (not the land). So if the land is worth 50K and the building 300K and you used straight line depreciation over 30 years, than 10K each year for 10 years would now show the building value as 200K. So if you sold it for a "20K loss from purchase price", you actually have a capital gain of 80K. 300K building, now worth 200K, land 50K still worth 50K, selling for 320K vs 350K purchase, gives a capital gain of 80K.

So very important to understand how you have handled this tax wise for the past 10 years.