Inherited Form 6252 showing depreciation?

[MarkfromWA]

Hi,

     I inherited 1/2 interest in a real estate contract that my parent's had carried in 2014.  They filed Form 6252 from that year till their passing in 2022.  I followed the prompts in TurboTax to create an installment sale on my tax return.  I used 1/2 the contract price, 1/2 the cost basis, 1/2 the fees to process the sale (RE commissions, and 1/2 the Escrow costs....).  I use 1/2 the prior years principal paid (line 23).  This results in the same Gross Profit percentage as they had.  I use the same Date Sold and code (1) as they did.  I only received principal payments and interest for both November and December on the year I am filing.  Everything looks good except TurboTax states that I have depreciation.  None of the prior form 6252 show depreciation on line 9.  This is a sale of 4 or 5 real estate lots without any buildings.  I do not believe you can depreciation raw land.  Is it correct to show depreciation?  If not, is there a work around to eliminate the depreciation?  TurboTax also asks if I want to use the same amount of depreciation on my regular and AMT process.  Help!

Thank You,

Mark

[Mike9241]

You probably entered something incorrectly. We can't see your form so review all your entries.  line 9 is either a manual entry or it comes from form 4797. You should only have capital gain income based on the principal you received times the gross profit % shown on your parents' 2022 return. 

what year are you doing and which version of Turbotax?

[MarkfromWA]

Hi Mike9241,

I initially ordered the online version of TurboTax in January or February of 2024 to complete my 2023 taxes.  But, due to issues with my parent's estates taking longer to complete, I was not able to complete the 2023 taxes by April 15th.  Since I overpaid my 2023 taxes, I asked and received a 6-month extension.  Unfortunately, my parent's estates were still getting completed.  So, I asked for a 2nd extension.  The IRS recently requested another 60 days to determine if I get a 2nd extension.  Since I passed the 1st extension, I can no longer use the online version.  I was told I need to download a version of TurboTax and print and mail my return.  This is fine.  I have been a happy TurboTax customer for the last 19 years and like the product.

My concern is that when I create an Installment sale in either the 2023 or 2024 TurboTax, I get depreciation.  I worked with an enrolled agent to verify my inputs were correct on a working copy of Form 6252.  She agrees that we should not have depreciation but is not familiar with TurboTax software as she uses another system.  Since I do not have the 2023 online version of TurboTax, I have been using the 2024 online free version to test different inputs to try and resolve the depreciation.  I have not been able to do that.  If I can eliminate the depreciation with reasonable inputs, I will happily use Turbo Tax for another 19 years.

When working in the free version of 2024 TurboTax here are my inputs I used to create an installment sale:

Desc of Property                    Twin Lakes lots

Property type Code                Time Share or residential lot

Date Property acquired          Various

Date Property sold                  7/8/2014

Selling Price                            $44,950

Cost Basis                              $14,042*

Can the selling price be           yes

determined the year of

sale

What is the holding period        Long Term (greater than 12 months)

Gross Profit Percentage        0.6876

Amount of Principal Paid        $18,620

prior to 2023

Was this property used             no

as a business or rental

at time of sale

Did you sell stock in this            no

installment sale

You stated this is not a            yes

collectible.  Is that correct

Was the property used in a    no

passive activity

Principal received in 2023        $292**

Interest received in 2023        $241**

Is interest from a mortgage    not checked***

on a home the buyer resides 

in

Was final payment received...      not checked

Was the sale to a related party    no

TurboTax states my long term gain is $201, which I believe is correct

TurboTax states I have depreciation and asks if I would like to use the same or different value of depreciation for my AMT calculation????

*  for this number I combined both the cost basis and selling cost.  This gave me the same Gross profit percentage as my parents had (0.6876) on line 19 of Form 6252.

**  I only received both the November and December payments of both principal and interest in 2023.

***  my parents sold land to the buyer.  He later built a house on the land and resides in the home with his wife.  I have tried inputting with this box unchecked and checked and it still shows depreciation.

Thank You for your help,

Mark

[AmyC · Accepted solution]

Go to your 2023 desktop software. Switch over to Forms mode. Locate the 6252 in the forms list on the left side. You can change the depreciation. You can also right click and source back to the origin of the depreciation.

Once you are able to see how your entries come together, you can move through the 2024 with ease.