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Capital Gains on sale of 1031 investment

I purchased a rental property in 1999 using a 1031 exchange for $187,000.  I've made improvements that total $41,000.  Over the years, I've depreciated about $10,000.  I sold the property in May of 2021 for $405,000.

 

Does TurboTax automatically add the improvements to the basis?

What is my adjusted basis?

Do I have to pay the capital gains tax in June 2021?

What is my capital gains amount?

Thanks

 

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5 Replies

Capital Gains on sale of 1031 investment

You can pay estimated tax for the gain and depreciation recapture but you might not have to if you paid all of your tax that was due on your 2020 return and have that same amount withheld form your paychecks or pay estimated tax in the same amount.

No one can tell you what your capital gain amount might be because there surely was deferred gain in the 1031 exchange in 1999 and also deferred depreciation recapture. You need to know those two amounts.

Normally your capital gains would be the sale price less selling expenses less your adjusted basis......the basis reduced by depreciation deductions allowed or allowable BUT you have to take into account depreciation deductions you deferred in the 1999 exchange.

I believe you have to add improvements to your basis in TTX manually......it doesn't happen automatically.

Capital Gains on sale of 1031 investment

When you enter the sale in the asset section you must divide the sale price and the cost of sale between all the assets listed for depreciation purposes & the land.   The program will not do this for you automatically so get a sharp pencil and hand calculator.  Hopefully you have entered the cost basis of the property and all the improvements over the last few years correctly ... if you have not then RUN to a local tax pro to get help cleaning up the mess.  

Capital Gains on sale of 1031 investment

So, I don't have any 1999 tax forms or records.  The original exchange was property that had been in the family for 60 years.  I'm thinking there was no basis.

Capital Gains on sale of 1031 investment

After all these years the property is most certainly fully depreciated.  

Capital Gains on sale of 1031 investment

Yep the property is most certainly fully depreciated and the adjusted basis is close to $0.....there might be basis in the cost of the land but it's got to be minimal if bought that long ago.

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