THE CASE OF “SAVVY SAM AND THE RIVERSIDE DREAM HOUSE”

Sam found some riverfront property he liked very much and planned to move his family there after he made some much needed repairs. So he rented it out while the repairs were under way. We got his file after the second year. We amended the previous two years returns to better utilize the depreciation schedules and he received refunds of $7000. He proceeded to make repairs to the house while it was rented, which he could deduct on his tax return. Over a 4 year period the tax cash benefits to his family was about $15,000.

After the 4th year he sold his old house at a sizeable gain, nontaxable, and moved into the riverfront house. We reminded him he would be taxed on the depreciation he had taken during the rental period when he sold this new house. He replied “We intend to live here until all of the kids are grown and gone and maybe beyond that. It sure is nice to have this interest free loan from Uncle Sam to help support this project.”

Uncle Sam is a great partner to have. He is very encouraging of home ownership.