Yes, you need to allocate the sales proceeds to each sold asset that you have previously reported for your Rental Property.
You may allocate the sale proceeds and selling expenses using any reasonable method. Most taxpayers use the adjusted basis at the time of the sale. Calculate the percentage of basis that belongs to each asset (home, land, etc.), then apply that percentage to the sale.
Example:
- Total Basis: $80,000 for home & improvements (net of depreciation); $20,000 for land ($100,000 total)
- Percentage of Land Basis: $20,000/$100,000 = 20%
- Total Sales Proceeds (gross sales price) = $150,000
- Sales Proceeds for Land = 20% x $150,000 = $30,000
- Sales Proceeds for Home = $150,000 - $30,000 = $120,000
- Total Selling Expenses = $10,000
- Selling Expenses for Land = 20% x $10,000 = $2,000
- Selling Expenses for Home = $10,000 - $2,000 = $8,000
Here's another example from Critter-3: How to Allocate Gains to Various Assets
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