Form 4797: Did Improvements, sold rental property, What is the Gross Sales Price of Improvements?

[SUH6]

I purchased a rental property in 2018 and immediately did rehab/capital improvements on it costing me $24k.

I took depreciation on those rehab/capital improvements in 2018 and 2019.

The property was rented from 2018 to 2020.

In 2020, after the tenants moved out, I did additional rehab/capital improvements costing me $80k, then I immediately sold the property in 2020.

The 2018 rehab/capital improvements ($24k) were obviously included with the sale of the entire house.

1. In Form 4797, Part III, when inserting the 2018 rehab/capital improvements, what do I input for [Line 20: Gross Sales Price]?

[tagteam · Accepted solution]

You might want to contact your TurboTax Expert if you are indeed using TurboTax Live.

See https://ttlc.intuit.com/turbotax-support/en-us/help-article/product-setup/connect-tax-expert-turbota...

Otherwise, you need to allocate a portion of the gross sales price to the improvement (in proportion to the cost basis of the rental property).

[Critter-3]

Since you sold the property in 2020 the improvements/repairs are simply entered on the Sch E as  repairs.  You do not set it up in the asset section since they were placed into service and taken out of service in the same tax year.   Talk to the LIVE expert you are using and they can explain this concept to you better. 

[Carl]

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.