Can 2 owners split the loss on sale of rental property?

[KayC430]

My boyfriend and I owned a rental property together. He has always reported the income, expenses and depreciation on his tax return. We sold the property at a loss in 2016. Is there a way that I can claim some or all of the loss on my tax return?

[DS30]

Yes, you would be able to claim your proportionate share of the capital loss for the sale of the rental property based on your ownership percentage.

(Please note that as a co-owner of this rental property, you should have included your share of the rental income, expenses and losses on the rental property on your individual tax return. Just make sure that you keep a record of the sale with your tax files for future reference.)

Additionally, when you sell a property that was used as a rental, you must pay 25 percent recapture tax (also referred to as Section 1250 recapture) as well as regular state income tax on the depreciation you claimed. (Remember the IRS will assume that you claimed the correct amount of depreciation every year—this is true regardless of whether you actually claimed any depreciation on your tax return).

Click this link for further information about reporting the sale of a capital asset

You will enter your proportional share of the rental property under the sale of a business property in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Business" tab ("Federal Taxes" tab in Premier)
2. Next click on “Business Income and Expense" ("Wages and Income" tab in Premier)
3. Next click on “I’ll choose what I work on” (Jump to full list)
4. Scroll down the screen until to come to the section “Less Common Business Situations” ("Business Items" in Premier)
5. Choose “Sale of Business Property” and select “start’
6. Select "Sale of business or rental property that you haven't already reported"
7. Sale of Business or Rental Property - yes
8. Enter all the information about your Rental Property Sale here
1. Description - address of property
2. Date acquired - original acquisition date
3. Date sold - date of sale (should be on 1099-S)
4. Total sales price - total sales price (should be listed on 1099-S)
5. Cost of property (or tax basis) plus expenses of sales - original cost plus any capital improvements plus expenses of sales
6. Depreciation taken on this property - total depreciation taken property when rental (Please note the IRS will assume that you have taken the correct depreciation on your rental property while your property was available for rent regardless of whether you have actually take it or not)
9. What type of property is this? - select - Rental estate that I took depreciation on.
10. Installment sales - no if not on installment sale
11. 2 screens that show the summary of what you have entered for your property sale
12. Sale of Other Business Property - Choose yes if any of these situation apply, otherwise choose no.
1. You sold property that cannot be depreciated such as vacant land, mineral rights or inventory
2. You sold business or rental property that you owed for one year or less
3. You sold business or rental property at a loss.
13. Total Gross Proceeds - enter your 1099-S sales information here (this could be the same amount that was reported earlier as sales price)

[Czaffani]

I have a similar case, i sold a rental property that i had with my ex husband, but he declared 100% of the income and expenses on his tax return every year. I never declared on my tax return. But when we sold i received a 1099-s with 50% amount of the sale price. In this case, how should i proceed?

[Vanessa A]

If you received 50% of the sales price then you will enter it by selecting the following:

• Federal
• Income
• Show More next to Investment Income
• Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
• Then walk through the questions and enter your share of the sale and expenses. 
• You will also enter 50% of your cost basis and selling expenses.  Meaning, if the house cost $100,000 and you put $25,000 into remodeling it, then you would enter $62,500 as your cost basis

If you did not receive 50% of the proceeds, then you can issue your ex-husband a 1099 telling the IRS that all proceeds that were assigned to you went to him. You will need to send a copy to him and a copy to the IRS.  You will not report the 1099-S on your return if you did not receive payment. 

[Hal_Al]

You need to coordinate with your ex.  You can report half or can report it all (there's a workaround in TT for the 1099-S, if he reports it all).

The 2nd,  and actually bigger, issue is "depreciation recapture".  He can (and should) report all the depreciation recapture, on his return, since he was the one who claimed all the depreciation in the past. But that means he wants to claim all the capital loss, too, to offset the depreciation recapture.