Sales expenses are broken down into two categories.
- Expenses associated with acquisition or disposition of the loan. Examples would include loan origination fees (sometimes referred to as points) and if the lender required it as a condition of the loan, property survey fees. These expenses are amortized (not capitalized) and deducted (not depreciated) over the life of the loan.
As the buyer, you amortized and deduct these fees over the life of the loan. As the seller, If (and that's a big *if*) you have any of these fees, they are fully deductible in the year of the sale.
- Expenses associated with acquisition/disposition of the property. As the seller, it is extremely uncommon for you to have any such fees, as it's usually the buyer that pays these fees. But as the buyer these would include things like the title transfer fee paid at the courthouse to transfer the title from the seller to the buyer. These expenses are added to the cost basis of the property and depreciated over the MACRS life of the property. For rental property that would be 27.5 years. If the seller pays any of these fees for the buyer, the seller can not deduct them. But the buyer can even though it was the seller that paid these fees.
So as the seller you will most likely not have any of the selling expenses mentioned above. But it's not so uncommon that I would say it's "uncommon". For example, if you sold the property through a realtor you had to pay the realtor a commission. So that commission would be added to your cost basis in the property.
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 2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" 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 it it's zero. Then you MUST work through the "Sale of Assets/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. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1
Basically, when working through an asset you select the option for "I stopped using this asset in 2019" 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.
