As you enter the rental in the SCH E section of the business
program, here’s the data and clarification you need to enter it correctly.
The open date of the business “must” be the date you “ORIGINALLY”
acquired/purchased the property, or earlier. Then if asked separately for the “incorporation
date”, that date “must” be at least one day “AFTER” you removed the
asset/property for personal use on your personal return.
When asked for the acquisition date of the property and all
assets, that date will be the “ORIGINAL” date you purchased it, acquired it,
and/or placed it into service on your personal tax return. The only “sales
expenses” you can claim on the business return are any costs incurred in transferring
ownership of the property from you, to the business. At most you will most
likely have title transfer fees, and that’s it. Since there won’t be any loan
fees most likely, you will not have “any” sales expenses that will add to the
cost basis of the property. Your title transfer fees are not capitalized and
depreciated. Instead, they are amortized and deducted over 15 years or the
remaining life of the loan. If you follow the prompts and interpret them
correctly so that you answer the questions asked by the program correctly, the
program will take care of this for you automatically.
Your “in service” date is the “original” date the asset was
placed “in service” on your personal return.
The “business use percentage” will be the same 100% as on
your personal return.
When asked for prior year’s depreciation already taken, it’s
important to get this figure right, or you will not be taking the correct
amount of depreciation on your business return. You’ll be double-dipping and
the IRS will audit both the personal and the business return if this is not
right. To get the correct figure you need for prior depreciation already taken,
look at the information you wrote down earlier for this asset.
On what you wrote down from your personal return, you must
add together the “prior depreciation” and “current depreciation” amounts. You
will enter that total into the business return for this asset for the total of
all prior depreciation already taken. Then the program will figure the correct and
pro-rated amount of 2018 depreciation for your 2018 business return.
When you add together the “current deprecation” amounts for
2018 from your personal return and your business return, that total should come
“close” to the total depreciation taken on this asset in 2017. It may not be
spot on exact, and that’s okay. So long as it’s within 5% or so, you’re fine.
I think that’s all the detail I need to cover for the business
return. The “other stuff” is pretty much easy to figure out, understand and
comprehend. When you’re all done with the business return the business will
issue each owner (you and your spouse) your own individual K-1. Print those K-1’s
and then go back to your personal 1040 tax return to enter them.
To enter them on your personal return it’s under the
Personal Income tab in the Business Investment & Estate/Trust Income
section. Under that heading elect to start/update the Schedule K-1 section and
enter each K-1 one at a time, individually.
That should do it. Of course, if you have questions then by
all means please ask.
