Investors & landlords

The answers are entered below per issue:

1. FIRST ISSUE - Business % use and depreciation:  You will use all depreciation you actually deducted when entering your sale because it is required.  You used the depreciation to reduce income, therefore you must recapture the full amount.  Form 3115 is not necessary in the year of sale, it would create income and the recapture of all the depreciation will handle that.
2. 2nd ISSUE - Quit Claim & Legal Expenses: You can add the legal fees paid in 2023 as sales expense or as a deduction on Schedule E. What kind of rental expenses can I deduct?
3. 3rd ISSUE - Sales Price vs Cost Basis: The correct way to set it up was your actual original cost basis and assume this is what you indicate and this is your cost basis for sale. No, you cannot use something other than your original cost and you cannot use fair market value (FMV) as your cost.
   1. There are only a few times FMV is used for property is:
      1. When property is converted to a rental and the FMV is lower than the actual cost.
      2. When property is inherited.  Cost basis is the FMV on the date of death.