Tax Guru – Ker$tetter Letter

The June issue of the online Journal of Accountancy also has an interesting look by Philip Witmer and Claudia Kelley at the decision process of whether it makes more financial sense to rent out a former residence or just sell it.  The authors have even included a fairly detailed Excel spreadsheet to help quantify the projections. 

I doubt if I will be using it much because it relies too heavily for my comfort on assumptions of such unknowable factors as future interest and appreciation rates.  Anyone who claims to have a crystal ball that can accurately predict such things should be avoided like the plague. 

What’s much more important in this kind of decision is whether you can stomach being a landlord and avoid getting a tenant who uses the movie Pacific Heights as his game-plan to steal property, as we had back in the Bay Area.

This article is still quite useful because they do address that point, as well as the very critical aspect of  losing the ability to use the Section 121 tax free sale rule after having been out of the home for three years.  They do mention that a Section 1031 like kind tax deferred exchange would most likely be a good move in those cases.