How can my gain on rental property sold in 2019 fo...
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How can my gain on rental property sold in 2019 for $123000 show a gain of $97688 when I purchased the property in 2011 for $90000?

Selling costs=$12000
Depreciation=$22000
2 Replies
Employee Tax Expert

How can my gain on rental property sold in 2019 for $123000 show a gain of $97688 when I purchased the property in 2011 for $90000?

It can't. Go back over your entries with a fine tooth comb. The amount is close to being double.

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Level 15

How can my gain on rental property sold in 2019 for $123000 show a gain of $97688 when I purchased the property in 2011 for $90000?

If you have more than one asset listed in the "sale of assets/depreciation" section and you did not split your sales price correctly across all depreciable assets, this is one thing that can cause the numbers to come out wrong.

If you sold the property at a gain, then you must show a gain on all assets - even if that gain is only $1 on some assets. Likewise if you sold the property at a loss, then you must show a loss on all assets - even if that loss is only $1 on some assets.

When you have some assets showing again and others showing a loss, the TTX program does not always handle things correctly with showing the total as a loss, or the total as a gain. It gets confused and the numbers get really screwed up big time sometimes.

Now for this scenario it doesn't happen all the time - but in my limited experience dealing with this, it will screw things up "most" of the time. Error check does not catch it either.

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 ahve a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" 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 it it's zero. Then you MUST work through the "Sale of Assets/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. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" 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.

 

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