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wafco33
Returning Member

Depreciating Asset "sale" when sell rental property

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.   

5 Replies
tagteam
Level 15

Depreciating Asset "sale" when sell rental property

Improvements (such as a new roof) are added to your cost basis while depreciation deductions (which were taken or should have been taken) reduce your cost basis.

Critter-3
Level 15

Depreciating Asset "sale" when sell rental property

Depreciation MUST be taken and recaptured as ordinary income when you sell which reduces the capital gains on the return.

 

Simple example :  

Purchase price + cost to purchase = cost basis

cost basis - depreciation taken  =  adjusted cost basis

sale price - adjusted cost basis + cost of sale =  profit or loss

Profit - depreciation recaptured as ordinary income (form 4797)  = capital gain or loss (Sch D)  

wafco33
Returning Member

Depreciating Asset "sale" when sell rental property

So what do I do with the $22.5k balance in the roof example ?

Critter-3
Level 15

Depreciating Asset "sale" when sell rental property

That should have been listed as an asset which must be sold off with the rest of the assets ... so you prorate the sales price & expenses of sale.  

wafco33
Returning Member

Depreciating Asset "sale" when sell rental property

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

4> assume Form 4797 gets the recaptured depreciation of 5k

 

Is this an acceptable approach, or are there errors?

 

Thanks 

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