Rental income on NYC co-op apartment

[curiousgeorge]

Hello tax experts!

NJ resident owns NYC co-op apartment - in past years, used to be occupied only on weekends; was turned into a rental in 2011.
A couple of questions please.
1. Is the monthly maintenance (which includes real estate tax and the underlying building mortgage interest) a rental expense?
3. Would a NY income tax return still be required if after all rental expenses, the net income would end up not being taxable?

Thank you very much!

[mwcpa]

"1. Is the monthly maintenance (which includes real estate tax and the underlying building mortgage interest) a rental expense?"
yes, but only for the time that the unit was available for rent, (if you used the apartment in Jan 2011 and made it available for rent on Feb 1, 2011, then January 2011 is not a qualified "rental" expense). Also, you need to break up the maintenance to reflect the underlying interest, real estate taxes, contributions to capital (adds to basis) and pure maintenance component.


"3. Would a NY income tax return still be required if after all rental expenses, the net income would end up not being taxable? "
Yes. If you want the "clock" to start on the New York stature of limitations, if you want the benefit of any losses that may not be allowed due to federal limitations, and if you have differences in the depreciation calculations under New York and federal law it is best to file a NY form

[curiousgeorge]

Thank you very much mwcpa.

Property was second home 1997 to 2010; turned into a rental on 01/01/11; will probably be sold sometime in 2012. Will sale be reported on both Schedule D and Form 4797?

[mwcpa]

4797 will flow to schedule D, so, yes.....

[curiousgeorge]

Good Morning mwcpa.

Thanks again. Have a great week!

[curiousgeorge]

Good Morning Mr. MW,

"3. Would a NY income tax return still be required if after all rental expenses, the net income would end up not being taxable? "
Yes. If you want the "clock" to start on the New York stature of limitations, if you want the benefit of any losses that may not be allowed due to federal limitations, and if you have differences in the depreciation calculations under New York and federal law it is best to file a NY form.

A few follow-up questions, please.

Is there a NYS Tax form that is the equivalent of 1040 Schedule E?

Kindly expound on your statement above regarding limitations and differences in depreciation.

The co-op apartment was second home 1997 to 2010; turned into rental January 2011. Co-op rules allow maximum 3 years to rent; most probably no losses. Rental income will only utilize Schedule E, no Schedule C or Form 8582.

How is depreciation calculated for a co-op unit? Where to obtain depreciation rules for NY?

As always, thank you so very much for your kind help.

[mwcpa]

NY conforms to federal forms, same schedule E, but NY does not recognize bonus depreciation.... if you are a DIY and you paper file you attach that form... if you efile then the "box" should properly submit the forms to NYS

depreciation would be based on the lower of the purchase price plus improvements or fair value on the date of conversion to rental property.

if the home cost 100, had improvements made of 25 and on the day it became rental property the value was 130, depreciation is based on 125... if the value was 75 then depreciation is based on 75.

[curiousgeorge]

Thanks again!!!