- 17 -
In Newcombe v. Commissioner, 54 T.C. 1298, 1300-1301 (1970),
we applied five factors in deciding whether a residence has been
converted to rental or income-producing property. Citing
Newcombe, petitioners contend that the facts that they did not
occupy 502 North Hickory after August 1995, that 502 North
Hickory had no recreational facilities, that petitioner had
received inquiries to rent 502 North Hickory (which he rejected
because he believed it needed to be renovated), and that
petitioners sold 502 North Hickory to an individual who offered
to buy it when he saw petitioner renovating it show that they
converted the residence to rental property or property held for
the production of income. We disagree.
We are not convinced that petitioners converted 502 North
Hickory to rental property. Petitioners’ arrangement with Hill
shows that petitioners intended to fix up 502 North Hickory but
not that they intended to rent it out when the repairs were
complete. If Hill had repaired the house, petitioners could have
lived in, rented, or sold it. Petitioners did not try to rent
502 North Hickory from mid-1996 when Hill moved out until they
sold it in August 1997.
We conclude that petitioners did not convert their residence
to income-producing property before they sold it in 1997. Thus,
they may not deduct depreciation or the operating expenses of the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011