Hi Mike,
Thank you again for your guidance and for sharing the link. I want to share what I will do and check with you in case I’m still misunderstanding anything.
After typing “enterable 4797” in Forms Mode (as you suggested), I saw that TurboTax had already created the Form 4797 pages for the properties I sold in 2025. That helped me see how TurboTax was calculating the gain. The part that confused me at first was the amount on Form 4797 Line 21, because I originally thought I needed to manually adjust the sales price or sales expenses to include vacancy‑period costs and remodeling. When I traced the Line 21 (“Cost or other basis plus expense of sale”) amount in Forms Mode, TurboTax showed that it is pulling from two places:
1. The building’s cost basis (from the Asset Entry Worksheet)
The Asset Entry Worksheet contains the building’s total original cost and land allocation. In earlier years, TurboTax included a Cost Itemization Statement listing my original acquisition costs (travel to inspect the property, appraisal, inspection, underwriting fees, etc.), but in the current year’s file I only see the total cost, not the detailed itemization. I assume this is normal since TurboTax carries forward the total cost rather than the individual line items.
2. The selling expenses (from the Sales Information screen)
TurboTax then adds the selling expenses I entered on the Sales Information screen, such as commission, title fees, transfer taxes, and HOA estoppel fees that occurred when the house was sold in 2025.
Based on this, it seems that post‑rental, pre‑sale costs (utilities during vacancy, HOA dues during vacancy, insurance during vacancy, repairs after the tenant moved out, cleaning after vacancy, and any remodeling or improvements) should be entered in the Asset Entry Worksheet as additions to basis — not in the sales price or sales‑expense fields. The Sales Information screen appears to be only for actual selling expenses. Is it correct for me to create a new “improvement/remodeling” asset for these items, since each improvement has its own depreciation and recapture? TurboTax will then automatically update Form 4797 with the correct sales price, selling expenses, basis, depreciation, and gain, since the form itself is not directly editable.
Two more questions:
1.for this property, I currently reported the land value as zero and entered the entire sales price as the building value. From what I can tell, TurboTax is still calculating Line 21 and the overall gain correctly because land isn’t included in that line. Please let me know if you recommend adjusting the land value before I finalize the return.
2. How to enter vacancy‑period carrying costs (utilities, HOA dues, insurance, property taxes, cleaning, and minor repairs after the tenant moved out). My understanding is that these are not depreciable improvements, so they should not be entered as a new asset. Where should I enter them?
If I’m misunderstanding any part of this workflow, or if there’s a better way to enter vacancy‑period costs and improvements, I would really appreciate your correction. Your earlier explanation helped me get much closer to the right understanding, and I want to make sure I finish this accurately.
Thank you again for your patience and guidance.
