Rental Property Sale

[wilkc]

My brother and I sold a rental property we owned.  We had allocated everything in previous years as a 50/50 ratio between us, and Turbo tax automatically calculated the split based on expenses and rents, etc.  This past year we sold the rental property and reported the sale using Turbo Tax under the rental property entry.  However, it appears turbo tax is calculating the full gain from the sale and depreciation vice a 50/50 split.  Can you confirm the program calculates the full gain and last years depreciation?  If this is true, then I will have to manually override certain forms to show only half the taxable gain and half the final year's depreciation on my tax forms and half the tax gain on my brothers tax forms.    Or am I doing something wrong?

Carl  

[Cynthiad66]

Yes, you need to enter your 50% ownership in the assets. TurboTax warns you about this on the "We Can Automatically Divide Your Income and Expenses for You" page where you enter your ownership percentage: "The percentage you enter here applies only to your expenses

Here is how to report your salw.

1. With your return open in TurboTax, search for rentals and then select the Jump to link in the search result.
2. Answer Yes to the question Did you have any income from rentals or royalties?
3. When you get to What are you here to report? select Rental property and fill out the description, address, and owner.
4. When you hit Tell us about your situation this year check the Sold box along with any other boxes that may apply.
5. Continue following the onscreen prompts to enter info about your rental property. Eventually, you'll get to the Review your rental property info screen. You can report the sale in the Expenses/Assets (Depreciation) section, along with any other pertinent info (like income and expenses)

Tip: Take your time and pay close attention. There's a lot of info and it's easy to miss if you're in a hurry.

[wilkc]

Thanks for the instructions on how to report the gain.  I've already entered everything.  You also confirmed the programs only allocates the expenses entered.  I just needed confirmation, (which you confirmed)  that the gain amount and depreciation was the total gain amount that I then need to separate 50% onto our two tax returns and override certain entries due to my unique situation.    Thanks for your assistance.

Carl 

[Cynthiad66]

You can also try this if it is still computing 100% of the sale.

If you used only 50% of the sales price on each return it seems like it should come out accurately. However, TurboTax may be selling 100% of the rental assets which would not end up being split in half correctly.

If you believe you TurboTax is using the full cost of the rental on the sale as opposed to 50% of the cost, you could change the rental house asset and land to 50% of the original cost and then use 100% instead of 50%. This will report the correct depreciation for all years, including the current year and record the appropriate gain or loss on the sale. 

@ wilkc

[Edited 3/17/2022 11;15 am pst]

[wilkc]

The only problem I see with the latter method is I would need to manually split the expenses by 50% also. Otherwise, it will deduct 100% of expenses.  I would also think this would be a red flag for the IRS, as the cost basis on both our tax returns would be different from previous reported years when compared.  

It would be nice if turbo tax calculated the expenses, depreciation and sale costs based on the percentage you selected under expenses.  I.e. in my case 50% expenses and then 50% sale and sale costs.  Based on what I saw, Turbo Tax premium calculated the 50 % expenses but is not calculating 50% depreciation, sale costs and sale price. 

Thanks for the suggestion.  I'll run the numbers based on the several ways you suggested. 

Carl