I bought a second house with the intention of fixing it up and then renting it.
- I have been working on it for almost three years and for the last two year
- I have been depreciating it on tax forms and adding the cost of the various builders (plumbers, roofers, etc.)
- I did not need to show any rental for the first three years of ownership per IRS rules (I believe).
Now in its third year I have changed my mind and have decided to live there.
- How will the IRS view my previous two years of build out costs and the depreciation that I have taken?
- If say the house cost $200,000 and I have put $50,000 into it what will be the base price from which I ultimately sell it in the distant future?