Rental Property > Personal Residence > Rental Property > Sale

@Carlor anyone else who cares to tackle this one: After 36 years of ownership (most of it as an investor), I finally sold my co-op apartment. Now I'm a bit confused as to how to enter it into TT 2022 and TT 2023. Here are the key facts:

a)  I bought the apartment and put it into service as a rental unit on 9/23/87. In-service date was 9/1/87 and I began taking depreciation, using 27.5 years SL and MM convention. The co-op didn't own the land at the time (it was leased), so I was able to include the full purchase price in my cost basis. The co-op eventually bought the land on 11/9/88.

b)  I moved into the unit on 9/1/89 and it became my primary residence. I stopped taking depreciation at that point.

c)  After getting married, having a child, and living in the unit for 3 years, we moved out on 8/25/92 and put it into service as a rental unit again. I resumed taking depreciation and rented it continuously for about the next 30 years. I took depreciation until the unit was fully depreciated as of 3/17/15. (I think there were a few years when TT told me to take more than the usual 1/27th depreciation, maybe to make up for the years that I suspended depreciation while using the unit as my primary residence. In any case, every dollar of my original cost basis was depreciated.)

d)  My last tenant moved out on 4/9/22, so it was rented for the first 99 days (.27 yr) of 2022 only.

e)  After the last tenant moved out on 4/9/22, I remodeled the unit over the remainder (.73 yr) of 2022 and sold it in 2023, closing on 1/10/23. The remodeled unit was never put back into service as a rental.

f)  CAPITAL IMPROVEMENTS: I spent $30,390 on capital improvements in 2022, plus $5,882 in 2023, for a total of $36,272. [The amount paid in 2023 occurred AFTER the 1/10/23 sale because this amount is for appliances that I bought on a payment plan that will be paid in full before the end of 2023.)

g)  NON-CAPITALIZABLE EXPENSES: I had $19,617 of other expense (non-capitalizable carrying costs) in 2022, but only $6,111 of that was incurred while the unit was still a rental. (The carrying costs were mainly HOA fees, which included my prorata share of real estate taxes and mortgage interest on the building's master loan.) The bulk of those carrying costs ($13,506) was incurred AFTER my last tenant moved out, during the remodeling phase.

So here are my questions for you:

1)  On the "Was This Property Rented for All of 2022" screen, I answered "No, this property was not rented all year," and showed Days rented = 99, Personal use = 0. I did NOT check the box that says "I did not rent or attempt to rent this property at all in 2022." Would you agree with those choices?

2)  Since the remodeled apartment was never put into service and went straight to sale in 2023, I never depreciated any of the capital improvements (f), but will add them to my cost basis when I do my 2023 taxes and calculate my capital gain on the sale. When I do that, can I include the amount that I spent (on appliances) in 2023, even though I paid for them AFTER the sale occurred?

3)  For the $6,111 of non-capitalizable expenses (g) that I incurred while the unit was still rented out in 2022, I'll claim those on my Schedule E for 2022, as usual. But what about the carrying costs that I incurred AFTER 4/9/22, when the tenant moved out, through the end of 2022? Would I claim those expenses on my 2022 Schedule A? Or should I wait until I do my 2023 taxes and claim them as part of my selling expenses, even though I incurred them and paid them in 2022?

4)  When I do my 2023 taxes I will state that the property was rented for only 10 days in 2023.

[3/15/23 CORRECTION: I completely misstated this. What I meant to say was: On my 2023 taxes, I will state that the property was OWNED for only 10 days in 2023, and was not rented or offered for rent for ANY days in 2023.]  I will include my selling expenses, capital improvements (including those made when I still lived in the unit myself, back in 1989), and any carrying costs incurred after my last tenant moved out. I realize there will also be a ton of recaptured depreciation (27.5 years' worth) working against me in figuring my capital gain. Can you think of anything special that I need to watch for when entering that info into TT 2023?