Is it a flip OR Rental gone wrong?

[Angie Jay]

Hello everyone, 

Have a Tax related question and looking for some clarification. It's the first time selling. and getting some different answers from accountant, so im confused as to what to do.  Here's the background

In 2017 bought a rundown house with the intention to fix then maybe flip or rent depends. ( Filed the property on schedule E, treated the same as other rentals), However had a lot of issues with contractor, long story short, Sold the house in 2018 ( Less than a year) at a loss just to get rid of the headache. It was never rented and had no income if that matters?

Now filing for 2018 tax, first Question: should this house go on Schedule E again ( as if it's not sold) and all losses are deductible on Line22? from what I read, since the property is sold, it doesn't go on Form 8582 and we can realize all loss from 2018 and 2017,  2018 loss can go on Schedule E, but where do I enter the loss from 2017? 

I thought the sale should be filed on f4797 section II since it's <1yr? but told by an accountant it should go on schedule D since there is no income. Who's right?

I am a bit confused and would really appreciate any inside. or any RE experienced CPA to talk to.

Thanks

[Michael Plaks]

@Angie Jay

This property, from what I understand, was still in rehab at the end of 2017. If so, it should not have been reported in 2017 at all, on any schedule. I have a strong suspicion that you deducted your rehab as repairs on your 2017 Schedule E. 

So it is messed up, and if it was done by an accountant, he should be your former accountant by now.

Your new accountant will need to discuss with you how to fix the 2017 errors or, at least, how to adjust for them.

Your loss should be allowed in full in 2018, but on what part of the return - that depends on how you and your new accountant decide to treat it. You mentioned "maybe flip or rent depends." You would need to settle on one of these two intentions, hence the need for a discussion with a tax pro.

And if you ask which one is better, the answer is still "it depends."