Gain on rental condo even though I sold less than what I paid for?

[taxbadlo]

I bought a condo in 2005, converted it 12 years later to a rental property in 2017, and sold it in 2024. Is the "Business Portion" of the asset sale 100%, or is it the % of time it was a rental from 2017-2024? If it's the latter, it would be a rental for 7 of the 19 years of ownership which is 36.8% business portion.

More data:

11/2005 - condo purchased for 304k

1/2017 - condo rented out - I could have sold at that point in time for around 220k (loss due to housing crash in 2008); At that time I used that value of 220k for FMV.

8/2024 - tenant moved out; unit vacant until sale

12/2024 - condo sold for 265k

Condo was sold for a loss compared to what I initially paid. But it seems like turbotax is using the 220k estimate from 2017 when it converted to a rental to calculate a gain on my sale. I'm hoping I can accurately claim the 36.8% business portion as taking a loss on the sale of the property and then paying taxes on a "gain" is brutal. Should I go back to 2017 and change my FMV? I'm confused how I can pay on a gain that isn't really a gain; can anyone explain that to me? More info below:

My 4797 looks as follows:

Part I, line 2 - gross sales price (d) 90,618; cost or other basis (f) 71,181; gain (g) 19,437

line 6 gain - 54,628

line 7 combination gain - 74,065

Part 3, line 20 - gross sales price - 171,882

line 21 - cost or other basis plus expense of sale - 160,195

line 22 depreciation - 42,941

line 23 adjusted basis - 117,254

line 24 total gain - 54,628

[AmeliesUncle]

For real estate, you don't divide the percentage like you referred to; you report 100%.  However, TurboTax is not set up to automatically report this situation (and in prior years directly told you to report it incorrectly and pay WAY more tax than you should).  It isn't easy to report it, so you may consider a tax professional this year.

If you try it in TurboTax, you need to know:

1. How much depreciation was taken.
2. Exact purchase price (including closing costs that add to the Basis).
3. Exact selling price (after subtracting pertinent selling fees).

Without knowing the exact numbers, my first guess is that you have no gain and no loss.  But if you have a 1099-S, it needs to be reported.