Depreciation Calculation Residential Rental Property year sold

[rita27]

I had residential rental property.  Lease terminated end of February.  Did not list for rent, instead listed for sale.  Closed on the sale end of April.  

I have recalculated the Turbo Tax depreciation calculation and it is using the sale date.  (i.e. Sold end of April and the amount recalculates as 3.5 months for a 27.5 year life and a mid month convention).  

It is my understanding that I can only depreciate the property through the end of the lease term (February).  So the depreciation expense should be for 1.5 months for a 27.5 year life and a mid month convention.  Is that correct?  If yes, how do I fix this in turbo tax?

[PatriciaV]

You are correct that depreciation stops when you retire your rental property. According to IRS Pub 946: Retired From Service:

"You stop depreciating property when you retire it from service, even if you haven’t fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events.

• You sell or exchange the property.
• You convert the property to personal use.
• You abandon the property.
• The property is destroyed."

Notice the list doesn't include "stop renting" the property. Although you would report rental days through the end of the lease, the assets were taken out of service on the date they were sold. For this reason, depreciation is calculated through the sale date.

[rita27]

Thanks. Any idea how to fix this in turbo tax?  Maybe some question somewhere that I am missing. 

[rita27]

Oh wait. I just re-read your answer. It appears it may be ok to depreciate through the sale date.  Thanks for the link to the irs pub, I shall review that