This is why I have trouble with just applying a ratio of the gain. In my case, I have had the property 22 years, and say for simplicity it was purchased for $100,000 (House $70,000, Land $30,000). Now, I put a new roof on one garage 2 years after purchase for a cost of $5000, so 20 years later it has (been) depreciated ~70%. Then, I put a new roof on another separate garage 2 years ago for a cost of $10,000, so it has only (been) depreciated ~10%. Let's say I sold the property for $500,000 and I simply assume that the cost basis for the property is $115,000 (House, Land, Garage Roofs). Here is the ratio table:
Assets Original Basis % of Total Basis Sales Price Cost of Sale
| Assets | Original Basis | % of Total Basis | Sales Price | Cost of Sale |
| House | $ 70,000 | 61% | $ 304,348 | $ 3,043 |
| Land | $ 30,000 | 26% | $ 130,435 | $ 1,304 |
| Roof | $ 5,000 | 4% | $ 21,739 | $ 217 |
| Roof | $ 10,000 | 9% | $ 43,478 | $ 435 |
| Totals | $ 115,000 | 100% | $ 500,000 | $ 5,000 |
This would say that the roof I just replaced 2 years ago is now worth over $40,000 (and the one replaced 20 years ago is now worth over $20,000 when I can actually replace it for around $10,000). I know the most recent roof is not worth $40,000, particularly given it cost me only $10,000 2 years earlier. I understand that the House that had a cost basis of $70,000 is now $300,000 plus and it was also depreciated for 22 years. It just doesn't seem logical when assets were added throughout the service life to increase their value proportionally to their cost basis. BTW, if you look at the current property tax assessment for reference, it is the land that has appreciated the most with the house only appreciating maybe 3x (vs 5x).
I'll read Form 4797 Instructions again but doubt I will understand it to the degree that it will guide me in a reasonable process. If you want to point me to the sections and paragraph that apply, or copy/paste them here that would be great. It would be nice if the IRS gave a simple example as you did.
BTW, I asked a Tax Specialist, and they said you can do it anyway you want. Their tax software added it all together, so they didn't disposition each asset individually like TT does, so they had never seen that before.
