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Author: mt2climb Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: A Foolish Landlord? Date: 1/22/2000 11:37 AM
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Hey Tax-gurus,

Hope you guys are all having a good weekend!

My question has to do with use of a my (former) primary residence, and determination of whether I fall into passive activity with rental activity exclusion, or into the vacation home category. Nota bene--I have look through your faq and p527, but am still confused. ;>)

I bought the house(3 br +den), and was temporarily assigned (Navy flier) to go plan air operations over the Balkans. While I was gone, I rented the place out to a couple of friends, at a decent rate for the 2 outta 3 rooms they were using. That is--I rented part of my home, basically the two downstairs br's and access to common areas.

This activity cusped two tax years, and I returned in Mar. Both guys were gone by the time I returned stateside (transferred or into their own new home), and I picked up another roommate--paying rent for 1 room--who stayed through the end of the year. There was 1.5 months in there where I was in the house by myself, but did not use the rooms that were available for rent.

So... my read of the vacation home rules seems as though it doesn't apply to my situation, since I was only renting a portion of the house, and I did not have "personal use" of THAT portion of the home during my time between renters.

Under the rental activity rules, with active participation, I figure I could claim up to 33.33% (1/3 br's) of my expenses, interest,depreciation, etc. for 8.5 months. This would certainly put me at a loss, and I do meet the requirements of the $25k exclusion.

Does this make sense? Again, it's not like I moved into the same space that the other fella vacated in Feb; I just moved back into my non-rental portion of the dwelling.

Are there restrictions on how many years I can use this 25k exclusion for loss on this kind of property? It is now rented out to a family in toto, at fmv, but I'll still be taking a loss next year due to the diff between income and my sched E expenses.

Any input on this would be appreciated! I've learned a TON just by reading this board, and I have a few more fav-Fools in the past few days.

Cheers,
EZ
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