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DEBRA WHITEFIELD / Money Talk

It Might Pay to Rent Your House Now, Sell It Later

December 05, 1987|DEBRA WHITEFIELD

QUESTION: I am moving and have to sell my house, and I am sure I will end up taking a loss on it. Is there any way around taking a loss that you know of?-- P. V.

ANSWER: You might look into the possibility of renting out your house for at least a year before you sell. Beyond that period, the IRS will view the house as a rental property rather than as your personal residence.

The classification is important, because you can deduct virtually all of your costs while you rent it out. That includes the cost of maintenance and repairs, utilities and depreciation.

If, after renting it out for at least a year, you sell at a loss, you can deduct the loss from your income. You aren't permitted to do that with a personal residence.

Q: I had a row with the IRS, and they charged me a penalty that I don't think I deserve. Is it worth my while to fight it? Or doesn't the IRS give in on penalties?--S. A. M.

A: The IRS has been known to waive penalties, but you may have to be persistent.

Start by asking the agency for its explanation of the penalty. Then, file tax form 843 or write a letter detailing your version of the facts and your reason for claiming that the penalty should be forgiven.

If the IRS rejects your claim, you may appeal to the Internal Revenue Service Center Appeals Coordinator.

And if you get discouraged, keep in mind that last year, the IRS abated $3.4 billion in disputed penalties.

Q: I was reading that commodities suffered even more than stocks in the crash in October. Do you know what they have done since?--I. F.

A: Copper and paper have bounced back--mostly because the worldwide supply of copper is dwindling rapidly and the paper industry, after a long depression, is starting to stage a comeback.,

Lead, nickel, tin and zinc also are fighting their way back from big price losses but are still far from their levels before the Oct. 19 crash.

Q: I have just received a notice that I am being audited by the IRS. I am so afraid that I will say something stupid. Do I have to go, or can I have my brother-in-law go for me? He does my taxes.--A. T.

A: As long as your brother-in-law is "willing and able" to discuss your records and tax return, he can appear in your place. The IRS once required the taxpayer to attend audits but caved in to complaints from tax preparers.

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