Investors & landlords
Let's review your steps. Based on your question it seems there may be a question that has not been answered correctly when showing the conversion from rental to personal use without any sale.
Key Question: Special Handling: 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.
When you are in the rental activity for 2022, you must select the 'Assets' section, then in each asset you must go to the screen titled 'Tell Us More About This Rental Asset'.
- Once you reach this screen for each asset, you must select 'This item was sold, retired, stolen, destroyed, disposed of, converted to personal use....'
- Next enter the date you stopped using the asset for rental purposes. And answer 'Yes' you always used this asset 100% of the time for business. (The percentage of use doesn't change until after conversion from rental to personal use.)
- Select 'Yes' for Special Handling due to 'You converted the asset to 100% personal use'.
You may see some depreciation expense which will be the partial year amount. For the period of the year it was available for rent, you may have some expenses which are allowed for that open period.
Keep all of these records because you will need them when and if you sell this home. All depreciation will be recaptured at that time, regardless of how long you hold the property for personal use. The records are necessary until you completely dispose of or sell the property.
Once you make this change you will not see a sale reported on Form 4797.
[Edited: 02/13/2023 | 6:59a PST]
