you can do this by checking the total disposition box
then in the asset worksheets, there are lines for the tax basis for gain or loss for both regular and amt purposes. you need to enter whatever numbers are required so no gain or loss shows up on the 4797.
you just can not delete the rental worksheet because there is probably current year income/loss that needs to be reported but depreciation needs to be limited because at a certain date you gifted the property which is in fact the date of sale. for tax purposes, your parents will get your depreciated tax basis because FMV is higher. they need to know this.
since this was rental property before it was personal use property, the home sale exclusion will need to be adjusted should they sell. they will not get the maximum and they will have to recapture the depreciation you took upon sale
the home sale exclusion is affected by the non qualified use rule for the years the property was rented prior to us receiving it as a gift.
Only "non qualified use" after 2008 is included in the calculation. say they live in it for 10 years and it was a rental for 6 years. their maximum exclusion would be 10/16 X $500,000
Deprecation since May 6, 1997 must still be recaptured, even in a home sale exclusion situation.
