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Sell of Rental Home

Purchased house for our daughter who paid the mortgage.  When she was done living there, we converted it to a rental property. We sold the house in 2023.   Turbo tax asks for the purchase date, the in-service date and cost.  For the cost do I use the basis (initial cost + improvements made) of the house when we converted from personal to rental?  Seems logical but wasn't clear when going through the questions.

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Sell of Rental Home

as cost you use the actual original cost + cost of improvements. the lesser of the gain or depreciation allowed or allowable must be recaptured as section 1250 gain. if you did not take depreciation see a tax pro.

example

selling price                                      100,000

selling expenses                                -10,000

net                                                         90,000

cost + improvements-                       60,000

depreciation allowed or allowable -8.000

tax basis for gain                                 52,000

gain (90K-52K)                                     38,000 of which 8K is taxed as 1250 gain and $30K is taxed as long-term capital gain 

 

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