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How do you convert a rental property to a business use property in Turbo Tax Business?

 
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7 Replies

How do you convert a rental property to a business use property in Turbo Tax Business?

You need to provide additional information/details. Assuming the property is currently (or recently was) being used as rental property, how will the property be used after this "conversion"?

How do you convert a rental property to a business use property in Turbo Tax Business?

The property is being used in a manufacturing facility; it is the same company that was using it as a rental property.  It is a commercial building.

How do you convert a rental property to a business use property in Turbo Tax Business?

The way you wrote your response, it almost sounds as if the company was renting it to itself.

 

Is there another entity involved? 

Carl
Level 15

How do you convert a rental property to a business use property in Turbo Tax Business?

You need to provide more details in order to get a *correct* useful response. There are to many assumptions that can be made here.

It is a commercial building.

Let's see if this helps, and I can only hope it's not dead wrong for your explicit and specific situation, whatever that situation may be.

Since it's commercial rental property (or was) then it was set up to depreciate over 39 years using straight line depreciation. (residential rental property depreciates over 27.5 years).  If you are changing from renting the property out to a third party, and will be using it for your own business, the depreciation schedule remains at 39 years straight line. Basically, you're just switching it from SCH E to whatever schedule is used for your business. What specific schedule is used depends on the type of business - be it a partnership, multi-member LLC, S-Corp or C-Corp.

To close the rental property out on the SCH E simply indicate that the property was "sold or otherwise disposed of". Note that you also have to indicate this in the Assets/Depreciation section of the SCH E also. Then when asked if special handling is required, indicate YES. If you select NO, then it's assumed you sold the property and you will be "FORCED" to enter asset sales information. For the date you stopped using it as rental property, that must be at least one day after the last renter moved out.

Then for making it commercial business property, you will indicate your acquisition of the property *EXACTLY* the same as you did on the SCH E. When asked when the property was placed "in service" it must be the exact same date it was placed in service on the SCH E.

Then you will be presented a figure for "prior year's depreciation already taken". This number must match the total depreciation taken on the property up to the day you took it "out of service" on the SCH E. Otherwise, you will be "double dipping" on the current year depreciation amount and that will raise flags at the IRS.

 

How do you convert a rental property to a business use property in Turbo Tax Business?

Thank you so much; this is exactly what I needed.

How do you convert a rental property to a business use property in Turbo Tax Business?

If the property was a Condo and residential rental and then you move your office into it, it then becomes depreciable on Form 1065 as opposed to Form 8825 Rental Property Schedule.  How can this be done in TT Business?   

How do you convert a rental property to a business use property in Turbo Tax Business?

Step 1 ... remove it from service as a rental in the rental asset section.

 

Step 2 ... using the adjusted basis from the rental  add it as a new  asset in the business asset section.  

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