Investors & landlords

@LB641

You are correct that interpreting IRS rules and recording transactions in TurboTax can be a challenge. In some instances, opinions based on prior experiences may conflict and create more confusion. Let's try to simplify things. Please provide more information if these are not the facts for your situation.

Your vacation rental consisted of:

• Rental Property, not fully depreciated
• Improvements, fully depreciated (or not)
• Other Assets, some fully depreciated, perhaps others that are not

Rental Property was sold in 2021, along with some of the related assets. Property, improvements, and assets were reported for the Rental Property in TurboTax for the prior tax year.

First step is to indicate under the Property Profile that you sold the property in 2021 ("Do Any of These Situations Apply to This Property?")

Now under "Sale of Property/Depreciation," edit the main Residential Rental Property asset and indicate that the item was sold, retired, etc. ("Tell Us More About This Rental Asset") and enter the date of the sale.

Before you continue, allocate the sales proceeds and selling expenses to all assets that sold at the same time (building, improvements, other assets), based on the ending asset balance after accumulated depreciation and current depreciation. You may wish to print the Depreciation Report to help with these calculations (under Forms >> Form 4562 (Depr Report).

Example:

Total Assets, net of depreciation (prior+current) = $200,000

• House = 150,000 (75%: 150/200)
• Land (no depreciation) = 10,000 (5%: 10/200)
• Roof = 20,000 (10%: 20/200)
• Assets = 20,000 (10%: 20/200)
• Assets (fully depreciated) = 0

Sales proceeds ($450,000), net of selling expenses ($50,000) = $400,000

• Sales price of house = 300,000 (400 x 75%)
• Sales price of land = 20,000 (400 x 5%)
• Sales price of roof = 40,000 (400 x 10%)
• Sales price of assets = 40,000 (400 x 10%)
• Sales price of fully depreciated assets = 0*

Perform these calculations for your sales price and selling expenses, using the same percentages you calculate for both.

      *Selling fully depreciated assets for zero dollars is unlikely to create problems as long as the depreciation report shows the current basis of the asset is also zero.

Use your calculated sales price & selling expenses to complete the "Sales Information" page for the Rental Property (Home).

Edit all other assets for this Rental Property, indicating that they were sold and entering the sales prices & selling expenses you calculated.

For those assets that were not sold, be sure to answer "Yes" for Special Handling Required. This assumes those unsold assets were converted to personal use, and results in no gain or loss for the disposition.

Finally, if you sold some assets before or after the main sale, enter the individual sales information for each asset rather than allocating the main sales price to those assets.

Be sure you continue through the interview for each asset until you return to the Property Asset page for this Rental Property. Then click Done.