Carl
Level 15

Investors & landlords

@waiyin21 thanks for clarifying.

Since you did enter the property on the 2020 tax return and I assume continue to import it for the 2021 as well as 2022 return, are you sure you didn't take depreciation? I ask, because the program will usually (not always) automatically set that up for you in the assets/depreciation section in the Rental & Royalty Income (SCH E) part of the program.  If it did set it up in your case, the only way you could have not depreciated it, would be if you intentionally deleted or changed things in the assets/depreciation section.

Otherwise, when you enter the property and all assets, the program will "assume" you depreciated it by figuring the depreciation you "should" have taken in prior years, along with the current year (2022) depreciation based on your in-service date(s) for the assets. Since you're required to recapture depreciation  no matter what, leave what the program assumes and figures so it recaptures what you "should" have taken.

Below is the general guidance for reporting the sale.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.