Yes, we are human!
1. Allocate according to the FMV at the time of sale since that is when the selling expenses were incurred.
2.Selling expenses $20k allocated among the items as @DianeW777 show...
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Yes, we are human!
1. Allocate according to the FMV at the time of sale since that is when the selling expenses were incurred.
2.Selling expenses $20k allocated among the items as @DianeW777 shows above goes to the house, land, and improvements. Improvements of $50k during 2025 are not expenses of the sale, they are capitalized costs. This means it either becomes another asset or you can add it to the basis of the house. The 2023 amount of $10k is already listed as an asset so you simply mark it sold and determine the amount. Diane is very thorough and her way is correct to divide up everything in the asset category to spread out the sales price.
For example: start with asset, basis = original cost minus depreciation
House $100,000
Land $20,000
Dishwasher $100 for small items like this, I find it is sometimes easier to sell it for zero and not include it in these calculations.
Bathroom renovated $10,000
New roof $15,000
Add up total cost basis of the assets listed. Total for this example is $145,100.
Next, divide each asset by the total to get the percentage for that item.
House $100,000 / 145100 =68.9% and so on.
Land $20,000 / 146,000
Dishwasher $100 / 146,000 - the percentage is too small to really use which is why I leave out the little stuff - 0.000684 %
Bathroom renovated $10,000 / 146000
New roof $15,000 / 146,000
Sales price times % calculated equals the amount to enter for each item.
3. Items depreciate for different lengths of time. Say the dishwasher above is now 8 years old. Then it would be already full depreciated and has no cost basis. You can check your asset sheets and see if you have any items that are so old they are no longer being depreciated. Mark those items as sold for zero. They went free with the house.
4. The Passive Activity Loss adds up through the years. Look at your Form 8582 from last year. You will see the amount for 2024 and you will see a line for all prior year unallowed passive losses. You want to make sure you are using the total of your passive losses because they are all deductible with the sale.
