@AmeliesUncle ok here is the deal when I used the method 1 process it separates out land capital gains on part I and structure in part III that is the only difference between method 1 and method 2 on form 4797. I think that is the only reason IRS could audit me for not separating out land and structure. I do not think this has a large impact if anything because I am still adding up all of my settlement statement costs to me and figuring into the amount. In addition I accounted for depreciation of 31,914 and it did adequately calculate unrecaptured gains of $4,000 after a reduction from my loss carryover on my schedule D. I am going to save this file of turbo tax and come back to it in a few days. Then print it out and check the numbers.....but so far I think you are correct. This is the way to do it if you FMV is less than your purchase price which is the correct way to do it in accordance with IRS Pub 527 as I stated earlier. It is just a little wonky how TT does it....not as clean but it does it.
