i've read that a rental property built new and then sold is eligible for LTGC and STCG treatment. Any expense greater than 1 year from the sales date is eligible for LTCG treatment. Any expenses incurred within 1 year of the sales date would be eligible for STCG treatment.
As an example
After completion the property was placed in service and had 5 weekly rentals earning a total of $2500 in 2022
This property sold for $250,000 on 5/19/2022. Settlement expenses were $15,000
The lot was bought 12/1/2019 for $50,000. Between 12/1/2019 and 5/18/2021 $25,000 was spent on beginning of construction on the building. Between 5/20 2021 and 2/28/2022 another $25000 was spent. total invested $100,000. Building was put in service 3/1/2022 and rents received of $2500. Then the building was sold for $250,000 5/19/2022
Sales price and expenses are allocated between the land, greater than 1 year from the sales date and less than 1 year from the sales date.
basis gross sales sales expenses net (ignoring depreciation recapture for the moment)
land 50,000 $125,000 7,500 67,500 LTGC treatment
>1 year 25,000 62,500 3,750 33,750 LTGC treatment
< 1 year 25,000 62,500 3,750 33,750 STGC treatment
How should this be treated in TurboTax.
I tried entering two different assets for the same address.
The first was the greater than 1 year expenses which included the land at $50,000 and the building expenses of $25,000. In this asset TT didn't accept the land value greater than the building, depreciation was not calculated.
In the sales portion, gross sales revenue and sales expenses were added. The net gain did not come out correctly, TT did not accept the land value being greater than the improvement value. Result was that the $25,000 basis of the partially complete building was not deducted from the gross sales price.
The second asset was the < 1 year expenses of $25,000 . This entry worked fine in TT, depreciation was calculate and the capital gain was correct. No depreciation is probably correct, since the building was not put in service.
Thanks for your input
In the sales portion, gross sales revenue and sales expenses were added. That seemed to work correctly
With this result, should the greater than one year old investment be sold using Sales and other Dispositions of Capital Assets form 8949 to sell the greater than one year old land and building expenses.
