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Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121189  
Subject: Re: audits - a slightly off-topic rant Date: 11/7/2002 7:13 PM
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<I suspect, though that a seemingly irrational fear can sometimes be caused by other things that the taxpayer may or may not be doing in other areas>


Like knowing someone who never declared the rent they collected from their tennent? Of course they were not able to take the many deductions that a landlord would be able to take either. This person I know put a lot of money into home improvements and eventually lost about 30-40k on the sale of their house (this was a number of years ago). A loss on your personal residence is not dedcutable, but it may have been somewhat offset if it was regarded as a rental property.

There are other issues here too. I once asked "what happens if a fire is accidentally started by your tennant? followed by "what happens if they have a serious accident on your property?". How would you explain to your insurance company that your major loss was caused by a tennant who you claimed in writing each year to not have? How could you put your single largest possesion at risk like that? This person wanted to know "how can you think like that"? I happen to think like that because I am very risk averse. Plus there is also the matter of doing the right thing. To me even the remote possibility of losing my home would be enough to reject that choice.

FWIW, I would think that netting out the expenses of having a tennant would eat up a lot of the income. I would also think that the net tax bill would be fairly small when all of the proper calculations are done. Plus the element of risk I brought up would be eliminated, leading to a better 'sleep at night' factor. To each their own.


BRG
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