@Steve042 , when you originally set up the asset ( residential rental property ), you would have entered $XXXX for the total price paid for the asset. Then TT would have asked you for the land price and perhaps you said this is $YYYY. Thus your depreciable basis for the property would have been $ZZZZ ( which is $ XXXX less $YYYY) with a yearly depreciation of $DDDD. Five years downstream, your basis in the property would be ( assuming no improvement costs ) $XXXX and accumulated depreciation of 5*DDDD making your adjusted basis as $XXXX less 5*DDDD. So when you eventually sell the prop. TubroTax would use the original Cost basis of $XXXX plus cost of any improvements as your basis. Then it will subtract the accumulated depreciation giving you an adjusted basis against which the sale proceeds ( Sales price LESS sales expenses including preparatory costs, sales commission, transfer taxes etc. ) to come up with the taxable gain. Note that, the portion of the gain that is due to accumulated depreciation ( i.e. all the depreciation allowable whether taken or not ) is treated as ordinary gain and the rest as capital gain.
Does this make sense ?
pk
