We bought a cottage in July '06, we fixed it up and enjoyed it for 2 months...after Labor Day we rented it for 3 months in 2006 for $700/month...
Our full payment (monthly) is $1400. What is the best way to file this in our 2006 taxes? Also, we have it for sale now and should make around $34K (not deducted realtor fees $6000, sales tax, etc.)...what can we deduct as far as our own work hours, realtor fees? THanks-Ken H

AtlantaTaxExpert

Ken:

You must claim the income and expenses associated with the rental on Schedule E. You can add the fix-up costs to the basis and depreciate thise costs.

You will then report the sale and capital gain (probably short-term) on Form 4797.

You cannot deduct your work hours. The costs of the sale can be added to the basis to reduce your capital gain.

You NEED to get professional tax help for tax year 2007 when you sell the property to make sure it is reported correctly.