Thank you for the detailed response. So does that mean I need to put in 100% as a business portion? Can you take a look at the following? I think it's in line with what you are saying but I'm still a little unsure.
When it is done that way my 4797 looks as follows:
Part I, line 2 - gross sales price (d) 90,618; cost or other basis (f) 71,181; gain (g) 19,437
line 6 gain - 54,628
line 7 combination gain - 74,065
Part 3, line 20 - gross sales price - 171,882
line 21 - cost or other basis plus expense of sale - 160,195
line 22 depreciation - 42,941
line 23 adjusted basis - 117,254
line 24 total gain - 54,628
Bottom line - even though I lost money on this property from when I purchased it, it's considered a gain since it went up in price from it's potential sales value when I first put it up for rent?
