Background details for home used as both primary residence (twice) and rental property (twice) over a period of 27 years.
Primary Residence 1993 - 2001:
Original purchase price of $115,000 ($103,500 home, $11,500 land) in 1991
Lived in home as primary residence until 2001
Rental Property 2001 - 2006:
Converted to 100% rental property (land and home together)
5-yr Term Depreciation of $18,819 on $103,500
Primary Residence 2006 - 2010:
This period used as source 2 of 5 year rule for capital gains exemption while on "Qualified Extended Duty".
Rental Property 2010 - 2020:
Converted back to 100% Rental property with adjusted basis of $91,316 (Original Basis - Prior Depreciation + Capital Improvement)
10-yr Term Depreciation of $32,377 on $91,316
Total Depreciation of $51,196
House rented until early June 2020
Sale of Property June 2020:
Qualified Extended Duty from beginning of period through Feb 2018 used to suspend 5-yr test period.
House suffered significant wear and tear (damage) at the end of the rental period. Using tax documents, land is valued at $92,400 leaving the home valued at $157,600 for the purpose of allocating the sale.
I expect that the sale would trigger re-capture of the total depreciation ($51,196) at 25% rate and that 100% of the sale would be eligible for the capital gains exclusion (married filing joint) as we have never used the exclusion on any other properties.
When working through TurboTax for the sale, I see the following issues which I don't know how to correct:
1. There does not appear to be any place to add in the depreciation for the prior period ($18,819). Shouldn't there be some place to add in this prior depreciation? (Yes, I realize this is a less usual case).
2. The sale is rolling forward as a capital gain of $84,641on 4797 line 7. TurboTax is excluding the land from the 2 of 5 exemption. Is this really supposed to be the case or am I doing something wrong? It was all purchased as one property in 1993 and used/rented as one property throughout.
I can provide more information, but I am not certain what is relevant to the situation.
Thank you.
