You have a tax issue. If those improvements were made or were in service during any of the rental periods you were required to take depreciation on them. The tax laws say that even if you didn't you must report the sale as if you took the proper depreciation and recapture that as section 1250 gain. You cannot deduct the missed depreciation in the year of sale, but it can be corrected by filing form 3115. I strongly suggest you consult with a tax pro to correct the failure. Improperly reporting the gain and taxes thereon, if caught, can lead to significant penalties and interest.
