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Correcting the cost basis on a sale of rental property

I purchased a property in 2004 for 320k and turned it into a rental property in 2010.   When I established cost basis for depreciation in error I used the purchase price as basis instead of FMV which was around 300k (I will get that determined and can use my assessment for the asset/land % split).    I sold it in 2018 for $250k less expenses.  How do I correct the cost basis?  From research I do not use form 3115 to do this as it is an error, not a change in method.   In the rental property section TT says not to change the cost basis carried forward from 2017.   

Also I am a Colorado resident and the property is in NY state.  I have to file showing the sale to NY and be taxed there if there is any gain.   So if there is a capital gain to be paid Federally and to NY, do I have to also pay capital gain to Colorado as well ? which seems to be doing it twice state wise. 


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Level 11

Correcting the cost basis on a sale of rental property

You set up your Cost Basis correctly for your Rental Property, using your Purchase Price, so you don't need to change it.  The FMV of a property can be very different than what you paid for it, and Depreciation is based on what you paid for the property.

You can use your current Assessment Statement to change the % of Cost and Purchase Price attributed to Land, if it was out of proportion initially (screenshot).

Follow the steps in the FAQ below to report the sale in Property Profile and Assets/Depreciation sections.

File a Non-Resident New York return to report the Capital Gain/Loss, as the property is located there. Prepare this state return before your resident Colorado return. 

You also report the Capital Gain/Loss on your Resident Colorado return, but will get credit for any tax you pay New York on that income, so you won't be double-taxed. 

Here's how to enter a Sale of Rental Property in TurboTax:  

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