Ah, I misread it and thought you said you ADDED $785,000 of capital improvements to the original cost.
Yes, you are correct, there should probably be some tax due.
Where are you entering the sale in the program? Are you entering the $50,000 of depreciation in that section?
Look at Form 8949 (or Form 4797). Is it showing the sale? It is showing the depreciation?
Is there anything on Line 9 of Schedule D?
Did you have any carryover capital losses that may be offsetting the losses?
Is your other income 'positive'? Or do you have substantial losses (business loss, NOL, etc.) that may be offsetting the taxable gain of the house??
