Unamortized Loan Fee Write-Off

[DaninAuburn]

A real estate partnership refinanced a loan in 2019.  The prior loan had an unamortized loan fee balance.  I "sold" the asset, but the Federal Asset Entry Worksheet, under the Dispositions section is highlighting the box, "Asset Sales Price" as red.  The entry is -0-, as it should be.  What am I doing wrong?  Or, what is the proper way to write-off unamortized loan fees?  Thank you.  Dan

[KathrynG3]

To write off unamortized loan fees,

• Manually adjust the current amortization to reflect the full amount of the balance. 
• Next year, delete this asset worksheet.
  • To delete forms next year, from the left menu, select Tax Tools>
  • Tools>Delete a Form>Scroll to the Asset Worksheet and click Delete

[DaninAuburn]

That worked!  Thank you.

Dan

[stier]

I have this same situation.  Where exactly do I go to manually adjust the current amortization to reflect the full amount of the balance?

[LinaJ2020]

I am going to use an example with simple figures to illustrate how you deduct your unamortized loan fees. 

Let's say the cost of the loan is $10,000, the length of the loan is 15 years. 

Option 1:

You would enter an amortizable asset with a cost of $10,000.  As you go through the interview questions, the prior depreciation and current amortization deduction will be calculated as $1,334 and $611 respectively. 

Here is the path:

• Federal Taxes
• Rental Real Estate / Rental Real Estate Assets (Depreciation)
• Rental Real Estate Assets Summary
• Select your asset and follow prompts. 

Then you would enter a sale of asset entry. 

• Federal Taxes
• Rental Real Estate / Rental Real Estate Net Profit/Loss Summary, under your rental select Edit
• Follow prompts, on-screen, "Your Rental Real Estate Income and Expense", scroll down to section "Dispose of Rental Real Estate Property, select Update
• Follow prompts
• On-screen, Tell Us More About the Disposal of Your Asset, enter your date of sold only and "leave others blank" to continue

Next, at the right upper corner, select "Forms" mode, to your left, scroll down to Asset Entry Wks, under Depreciation deduction, it would show $611.  You would need to override the amount to the remaining depreciation after prior-year  In my example, it would be (10,000-1334=8,666).  By overriding, you will lose the coverage of 100% Accurate Calculation Guarantee and not able to e-file. You would need to paper-file.  Click here: Override and see the image below: 

Option 2:

You do not need to override.  You should be able to e-file.

First, undo the override from above, next to $8,666( On the line of Depreciation deduction, right-click and select "Cancel override"), the amount should be reversed to $611.

Then return to the step-by-step interview section by going through the same path as above, you will make a separate asset entry. Use the cost as $8,055 (10,000-1334-611), loan team as "1" year, the purchase date is 1/1/2019.  Your total deduction should be calculated as $8,055.  Do not enter any "Dispose" transaction.

The total depreciation deduction would be 611+8055=8666 ( same result as option 1)

Note that:  If you select option 2, the 2019 information will be transferred over to the 2020 TurboTax program next year.  Since you did not dispose of this separate asset this year, when you do your 2020 taxes next year, you would need to remove it from your tax forms.

@DaninAuburn @stier