It did make a big difference. The property I sold was essentially a tear down and about 50% of my basis has been depreciated. It is in an area that saw substantial appreciation in the land values so I allocated 75% of the sale proceeds to land and 25% to improvements. The 25% allocated to improvements did not exceed my deprecated basis so I had no recapture tax. If I allocate more of the proceeds to improvements then the gain exceeds the basis and I have to pay recapture tax. I can justify the larger allocation to land as nearby vacant land has sold for similar prices as my property with improvements but I'm just not convinced it is allowed.
A local CPA told me, "When you sell real property, you must sell both property and land together. You cannot split the proceeds and sell the land and property separately to avoid depreciation recapture. Sorry." I typically trust turbotax but I'm concerned on this one.
