We owned a beach place for 8 years. Seasonal rental only and we used sometimes on weekend off season. Sold in 2020 and TurboTax figures a huge gain. Every year we had a passive loss due to minimal rentals and minimal use by us but year round expenses. Normal years we put in how many days we used and how many were rented. Turbo tax says we must take 47% of the sale price less 47% of the closing expenses and it deducts from what we put in as the asset price in 2013. How do I put in the assessments we paid this year and in one past to lower the gain by increasing the basis. How does depreciation work here and if we had a loss every year how do we have a gain? An example with dummy numbers would be great.
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assessments are not a cost of sale but are among the costs associated with the renting of the property.
assuming you rented for more than 14 days and personal use exceeds the greater of (1) 14 days or (2) 10% of days rented during the year then:
all rental income is reportable
deductible expenses:
1) interest subject to mortgage interest limits
2) property taxes
3) casualty losses
4) renting expenses such as advertising, agent fees not attributable to operating the property as a dwelling ( ie expenses associated with personal use)
5) other expenses deductible only to the extent income exceeds categories 1 to 4 above
gain on sale
must be treated as 2 properties
gain attributable to personal use is a capital gain with no home sale exclusion
gain attributable to the rental portion is ordinary income to the extent of depreciation recapture. any remaining gain is section 1231 capital gain
under IRC section 121(b)(5)(A)
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