Form 4797 GAIN on Sale of Conversion of Home to Rental & FMV

[TAXPOS]

I already filed but never had time to check if Form 4797 was filled out correctly on Gain of Sale of Conversion of Home to Rental using FMV.

I followed directions in forum: 

1. Entered info for rental property in:

Rental Properties and Royalties. 

Entered FMV for Cost of Property

Stopped at Special Handling.

2. Entered Info in Sale of Business Property.

3. Form 4797 Page 1: Has Gross Proceeds & Gain from page 2 listed. 

Page 2: Has Description of Property then under column A on lines 20-24 has listed the numbers for: Gross Sales Price, Cost or other basis plus expense of sale, Depreciation, Adjusted basis, and total gain.

Then at bottom of page, total gain is listed again.

So did Turbo Tax fill out the 4797 right:  for Gain for sale of Conversion of home to rental using FMV?

Thanks,

Jim

[Carl]

Who was the last person to move out of the property prior to the sale? You the owner? Or a paying tenant? If a paying tenant, then the only place you report the sale is in the Rental & Royalty Income (SCH E) section of the program.

Additionally, when reporting the sale (regardless of where it's reported) your cost basis is what you "actually paid" for the property and any property improvements. "NOT" the FMV.

[Anonymous]

the only purpose of FMV is when you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion.   

[Rick19744]

I believe we need to go into a little more depth here:

• When the property is converted to rental the basis for depreciation is the lower of the adjusted basis on the date of conversion or the Fair Market Value (FMV) of the property at the time of conversion. Generally the basis is the cost of the property plus the amounts paid for capital improvements.
• When the property is sold the basis is calculated differently for gain or loss. When the property is sold at a gain the basis is the original cost plus amounts paid for capital improvements, less any depreciation taken. When sold at a loss the starting point for the basis is the lower of property original cost or the FMV at the time it was converted from personal to rental property

This is a confusing area, so just want to make sure the correct input figures are used for TT.

[tagteam]

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@Rick19744 wrote:

This is a confusing area, so just want to make sure the correct input figures are used for TT.

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It is a confusing area and just to add a slight wrinkle, TurboTax does not handle this scenario particularly well.

For example, TurboTax will prompt users to enter the lesser of fair market value or original cost on the date of conversion to rental use but does not allow any adjustment (in the Rental Properties section) for calculating gain or loss upon a sale. Depending upon the selling price, users may have to enter the transaction in the Sale of Business property section (if available in their version of TurboTax) or use Forms Mode (if they are using a desktop version of TurboTax).