Hi,
I bought a house in 2016.
Between 2016 and 2019, I rented it and declared the rental revenue and expenses on a Form 1040 - Schedule E
In 2019, I demolished the house and started the construction of 2 units on the lot
From 2019 to 2024, construction is ongoing. I incurred $1.3M of expenses with 99% of receipt for it. I did not declare anything related to the property during those years as there were no income.
5) In 2024, I sold one unit.
My question are the following:
a) to calculate the gain/loss now that one unit is sold what basis should we take?
Fake numbers for illustration:
Price of purchase in 2016 = $300K
Adjusted basis at the end of the rental period = $350k (improvement, depreciation...)
Once the house is demolished, do we start from this basis of $350k to calculate the gain/loss?
Or do we need to know the price of the land only as the house is demolished? Then, should we use the FMV of the land as of 2019?
b) can I wait to sell the other unit in 2025, or do I need to declare the sale in 2024 even if I keep incurring costs on the other unit?
c) I think it would fall under capital gain, but just wanted your opinion.
Thank you so much in advance for your help,
