Investors & landlords

Let's start with one question at a time.

1. Am I understanding correctly in that the sales price I should be using in TT is $146,065 (65.5% of $223K) less $5,093 (65.5% of the seller help and closing cost), less $6500 for the new roof and other improvements (since they were not part of the land)?  Bringing my total adjusted sales price to $134,472?  
   • Answer: You can do that if there is no Form 1099-S, or you can use the improvements at 100% and sales expenses of 65%% as sales expenses and leave the selling price in tact at the 65.5%.  If you have Form 1099-S you will want to keep the sales proceeds the same between the building and land to match the reporting form.
2. So perhaps this was a mistake from the beginning but guessing it can not be resolved now and likely doesn't matter other than it allowed for potentially a greater depreciation each year than I should have been taking and will now need to make that up in depreciation recapture taxes.​​​​​​​
   • Answer: You are correct on the action to take, however it would seem with all of your improvements over the time you owned it until it was rented you likely did add those improvements cost even if you did do the work.  If you originally paid $165,000 and then converted it to a rental you aren't talking about $100,000, it's more like $35,000 (+/-). Unless you think I am missing something.  ($165,000 + $35,000 = $200,000) 
3. I should use the $108K (65.5% of the original purchase price) as my starting position and add to it the cost of improvements that I have made over the entire 16 years of ownership and 65.5% of the closing cost and seller contributions regardless of the "in service" amount?
   • Answer: It appears it is one in the same figure. You should complete the sale with the information you have recorded in your tax return because it appears that your rental cost basis is actually what you did use when you converted it to a rental property as opposed to fair market value (FMV).  

​​​​​​TurboTax will use the accumulated depreciation to determine the reportable gain and recapture.  You should enter your sales proceeds, sales expense for both building and land separately, then follow the instructions above for the sales expenses and any improvements completed after your began renting the property and only if they were not entered as capital improvements for depreciation in an earlier year.

Please update if you have more questions.