|If you "sell" each of the non land/building assets(such as fence, roof) for a gain as was the entire property sale (more than cost) I don't see how you benefit ie. recovering the cost that you paid for the fence roof etc|
|Ex= 27.5 k for new roof depreciated over 27.5 yrs, got 5 yrs into so 5k was depreciated and then sell the rental property - is the remaining 22.5 k is then added to the "cost basis of the building" or a "selling expense" or what so that I benefit from the cost of installing a new roof.|
Other posts say use the roof current FMV, but since the sale of entire property is 3x the purchase cost, a FMV of roof 3x what I paid for it seems unreasonable
So for the remaining 22.5k roof asset i will
1>sell roof for 22.5k for a 0 gain
2>no expense of selling, keep selling expenses all on building
3>add 22.5k to cost basis. Since Purchase price was 200k for building and 300k for Land, the roof added to the original basis(ignoring depreciation to make this simple) the new cost basis of building will be 220k
4> assume Form 4797 gets the recaptured depreciation of 5k
Is this an acceptable approach, or are there errors?
ALL the assets listed for depreciation need to be sold so you need to allocate the sale price & costs of sale over all of them. You cannot just give it a $1 sale price as it will throw off the total calculations.
A simple example using 100,000 of assets and a sale price of 200,000 :
assets original basis % of total basis sales price cost of sale
house 70,000 70% 140,000 14,000
land 20,000 20% 40,000 4000
roof 10,000 10% 20,000 2000
totals 100,000 100% 200,000 20,000
Recaptured depreciation is added to the gain (in a sense). It is not added back to the cost basis.
Remember, depreciation *reduces* your cost basis, thus increasing your gain if sold at a gain, or reducing your loss if sold at a loss.