@DianeW777 , I think I am more or less done with my return. Thanks for your ongoing help.
I just want to clarify a few things.
- I removed the HVAC and the appliance from Asset section. TT was not calculating any depreciation, but I anyways removed them as per your suggestion. So, my gains are no longer being prorated across these assets and they do not show up on Form 4797 as a Property. They were added to the sales expense. What do you mean by "Add them to the original cost basis and keep the entire sales price for the combined assets in one entry." These don't show up anywhere, so not sure what it means by keeping the entire sales price for the combined assets in one entry .
- For some reason, the Form 4797, Line 1a is not being populated in TT. There are earlier threads saying that it may be a bug in TT. I have gone ahead and entered manually the Gross Sale Price from 1099-S. I figured that IRS will be getting this form, so it makes sense. If this shouldn't be done, let me know.
- For one of the assets, TT asked me to "Enter the amount of additional depreciation deducted after 1975". This asset had an amount in the "Special Depreciation" column, and I entered this amount in additional depreciation. Hopefully, this is accurate.
- Going through all the steps, and the suggestions in your email, I think disposing each asset with a gain (when there is an overall gain) is the only method that should be used. You had also mentioned earlier that:
The IRS requires that the selling price be proportionately prorated to arrive at a selling price for each 'piece' of a rental property since many assets can be placed in service at different times, such as your roof.
So, entering the Home and Land directly within the Sale of Business Property section, is not entirely accurate. You MAY reach the same gain/tax, but the expectation is to show a gain against all assets and the only way to do it is from the Rental section. The challenge is for people in my situation where the Rental Basis < Purchase price. This will be true for most people buying the property prior to 2008 and putting it up for rental after few years. So, adding Purchase Price - Rental Depreciation Basis to the Sales expense is a common situation.
