Yes, on the screen, Tell Us More About This Rental Asset, there is a box to check indicating that the rental property was "sold, retired, stolen, destroyed, disposed of, converted to personal use, traded in, or given away (or it's no longer being used in this business for some other reason)." That is the box that you and your sister will check-off. On the same screen, your sister and you will also have to indicate the date you "..sold/retired [the rental property] from use."
Regarding your interest in the rental property, it appears you will have a capital gain. Additionally, because this was a rental property, did you take depreciation on the asset? You should have taken depreciation, and therefore, you may have to recapture some of that depreciation when you enter your basis and sales proceeds. Depreciation recapture is some percentage amount of depreciation taken in prior years that will be taxed, hence "recaptured," because the property now has been taken out of rental service. If you used TurboTax during the years the property was a rental property, TurboTax will show you the depreciation taken to date on the screen, Confirm Your Prior Depreciation.
Because it appears your rental property was not always rented and incurred personal use, be mindful of the limitations that may cause a part-time rental to become a personal residence. You are correct that 14 days is part of that analysis. The IRS considers the rental property to be a personal residence based on the following:
If you rent a dwelling unit to others that you also use as a residence, limitations may apply to the rental expenses you can deduct. You're considered to use a dwelling unit as a residence if you use it for personal purposes during the tax year for a number of days that’s more than the greater of:
- 14 days, or
- 10% of the total days you rent it to others at a fair rental price.
The IRS also includes the following example of a vacation home that might be a personal residence and thus not a rental property.
It's possible that you'll use more than one dwelling unit as a residence during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a residence unless you rent your vacation home to others at a fair rental value for 300 or more days during the year in this example.
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