How do I enter the actual basis of a rental property I have sold. It was originally my residence, and the depreciable amount was less than actual basis (fmv)?

[timorousbeastie]

Turbo tax appears to have calculated the gain based on the amount being depreciated, fmv at start of rental, which is less than actual basis.

[Critter-3]

The program is correct ... you use the adjusted basis for the sale and not the original purchase price ... this is what happens when you convert when the property was worth less at the time of conversion. 

[Mike9241]

this is from a thread from Tax Advisor

https://www.thetaxadviser.com/issues/2008/jul/convertingaresidencetorentalproperty.html#:~:text=If%2... 

Calculating Gain/Loss on Subsequent Sale of Rental Property

If a residence converted to rental property is later sold at a gain, the basis in the converted property is the original cost or other basis plus amounts paid for capital improvements, less any depreciation taken. If the sale results in a loss, however, the starting point for basis is the lower of the property’s adjusted cost basis or FMV when it was converted from personal to rental property (Regs. Sec. 1.165-9(b)(2)). This rule is designed to ensure that any decline in value occurring while the property was held as a personal residence does not later become deductible on the sale of the rental property.

the reg

(b) Property converted from personal use.

(2) The loss allowed under this paragraph upon the sale of the property shall be the excess of the adjusted basis prescribed in § 1.1011-1 for determining loss over the amount realized from the sale. For this purpose, the adjusted basis for determining loss shall be the lesser of either of the following amounts, adjusted as prescribed in § 1.1011-1 for the period subsequent to the conversion of the property to income-producing purposes:

(i) The fair market value of the property at the time of conversion, or

(ii) The adjusted basis for loss, at the time of conversion, determined under § 1.1011-1 but without reference to the fair market value.

was this your principal residence for any 2 out of 5 years before the sale? if so, you may be entitled to a home sale exclusion. if it was your principal residence for less than 2 years out of 5 years before the sale you may be entitled to a partial home sale exclusion depending on the reason for the move.  

these are situations that may be difficult to properly reflect in Turbotax. 

[Hal_Al]

For more specific help, please provide actual numbers: sale amount, original cost (+improvements), FMV at time of conversion, depreciation taken.

As others have said, what you use depends on whether you have a gain or loss (before depreciation recapture). YOU enter the cost basis, TT does not pick a number to use.

[Critter-3]

Ahh yes ... the old rule applies ... "if the basis for a gain is a loss and the basis for the loss is a gain then you have no loss or gain to report".   Thus you will need to compute the sale both ways and probably use the sale of business property section of the program and not sell it off in the rental asset section.   I highly recommend you use professional assistance in this matter if any of this is scary or confusing to you.  

[timorousbeastie]

Thanks for the replies. To give some figures, when I converted from main residence to rental (in 2016) adjusted basis was approx $260k and fmv $225k. So I used $225k. Depreciation up to date of sale has been $35,286. Net sales proceeds are $364,828. I went through the TT interview questions and, ignoring for the moment the land/house breakdown it is showing a gain on sale of business property of $175,114. The program has used the figure of $225k to calculate gain. I am a recently retired EA so I understand the tax issues. I used TT for the first time last year for 2020, so am still not very familiar with it. How do I enter the adjusted basis of (approx) 260k into the calculation of gain? I went through the questions one by one and was never asked what the adjusted basis is. TT behind the scenes has used the depreciable basis which I entered into Turbo Tax last year when I input the rental details.

[Critter-3]

Ok ... since you have understanding ...

step 1 ... in the rental section close out all the assets by converting them to personal use as of the date of sale... this stops the depreciation.

step 2 ... print a copy of the depreciation worksheet so you have the total depreciation to the date of sale. If you are using the superior downloaded program you can switch to the FORMS mode to get this info.

step 3 ... in the sale of business assets that comes up a bit later you can make entries for the sale of the land, the building   and all the section 1245 properties lumped together as one entry if you like... as you know the IRS won't care as long as they are on the 4797 in the correct places.  

This is my mini version of  a tutorial  that should be in the downloaded program: 

 

What is Forms Mode?

Forms Mode lets you view and make changes to your tax forms "behind the scenes."

If you're adventurous, you can even prepare your return in Forms Mode, but we don't recommend it. You may miss obscure credits and deductions you qualify for, and you may forget to report things that will come back and haunt you later.

Forms Mode is exclusively available in the TurboTax CD/Download software. It is not available in TurboTax Online.

Related Information:

• Why would I use Forms Mode?
• How do I switch to Forms Mode in the TurboTax for Windows software?
• How do I switch to Forms Mode in the TurboTax for Mac software?
• What is-the-meaning-of-all-the-different-colors-in-forms-mode

If you want to play around with different figures and tax scenarios without affecting your original return you can ….

• >>>In the TurboTax CD/Download software by creating a test copy: 
• 1.  Open your return in TurboTax. 
• 2.  From the File menu, choose Save As. 
• 3.  Give the copy a new name to distinguish it from the original (for example, by adding "Test" or "Example" to the file name). 
• 4. Click  Save. You are now safely working in the test copy and anything you do here will not affect the original. 
•  https://ttlc.intuit.com/questions/1900642-how-to-make-a-test-copy-of-your-return

• >>  use the WHAT IF tool: 
• - Click Forms Icon (upper right of screen) or Ctrl 2 (forms view) 
• - Click on the Open Form Icon 
• - In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form 
• - You will see the worksheet on the right side of the screen; enter the information right into the form 
• - To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

Once you have filed successfully … you can shut off the auto updater function and then save the return &  .taxfile.

It's always a good idea to make a backup copy of your tax data file, in case your original gets lost or corrupted. Here's how:

1. From the File menu in the upper-left corner of TurboTax, choose Save As (Windows) or Save (Mac).
2. Browse to where you want to save your backup.
   • Tip: If you're saving to a portable device, save it to your computer first to prevent data corruption. Then, after completing Step 4, copy or move the backup file to your device.
3. In the File name field, enter a name that will distinguish it from the original tax file (for example, add "Backup" or "Copy" to the file name)
4. Click Save and then close TurboTax.
5. Restart TurboTax and open the backup copy to make sure it's not corrupted. If you get an error, delete the backup and repeat these steps.

If you make changes to your original tax return file, repeat these steps to ensure your original and backup copies are in-synch.

Related Information:                             

• Retrieve a Tax File from a Portable Device
• What's the difference between the tax data file and the PDF file?

AND save it as a PDF so you have access to a copy even if you don’t have the program still installed and operational :

• How do I save my return as a PDF in the TurboTax software for Windows?
• How do I save my return as a PDF in the TurboTax software for Mac?

AND protect the files :

• How can I protect the tax files on my computer?

*** Other clues to the downloaded program ***

In the forms mode ... double click  or right click on a box on a form to data source it ... sadly it doesn't work on all boxes. 

What's the meaning of all the different colors in Forms Mode?

When you look at an onscreen tax form using Forms Mode, you might wonder why one figure is blue and the one next to it is red or black.

These colors indicate the source of that data.

Color	Meaning
Blue	You entered this data, either in the interview or Forms Mode.
Black	The program entered this data or calculated this amount.
Red	This data has either been overridden or is invalid (for example, a ZIP code that doesn't exist).
Red italics	You marked this amount as estimated.
Black italics	The program calculated this amount from an amount you marked as estimated.
Purple	This information has supporting details.
Aquamarine	This data was transferred over from last year.
Green	This data was imported from Quicken or QuickBooks.
Yellow fields (Windows)	Yellow fields allow user input. Anything you enter here shows up in blue.

[Critter-3]

@timorousbeastie 

I highly recommend you switch to the downloaded version ... you will like it better.  Although all entries should be made in the step by step mode the FORMS mode is wonderful.  FYI ... ALL of the downloaded version can handle all the same forms so you can save a few $$ by just using the Deluxe version instead of the Premier you are forced to use in the online system (Basic if you don't need a state return).  You can save the .taxfile from the online account you are working with and open it in the downloaded version to continue seamlessly.  

To  continue in the desktop version see this…….
https://ttlc.intuit.com/questions/1901476-how-do-i-switch-from-turbotax-online-to-the-turbotax-softw...

You can also purchase the CD/download from various retailers such as Costco, Amazon, Walmart, Best Buy, Staples, Sam’s Club, etc. etc. etc.

This link Where can I obtain authentic TurboTax software? has a list of authorized TurboTax resellers.

When you use desktop software, there is an additional fee to e-file a state return.  You can avoid that fee if you print, sign and mail the state return.  The state e-file fee is $19.99 and increases in March.

[Hal_Al]

Instead of entering the sale in the rental section of TurboTax (TT), try entering it as "Sale of Business property" under "Business Items" in the Wages and Income section.  There, TT allows you to enter the asset Basis.