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nangua825
Level 3

how to calculate the business portion of rental property

I bought a condo in 2007, lived there and moved out in Oct 2010. After moved out I converted it to a rental property until 2018. After tenants moved out in Sept 2018, the condo was for sale and sold on June 2019. how do i calculate the business portion of the rental property? is it the business portion 100% or only the time between 10/2010 to 06/2019 counted as business portion? 

7 Replies
LeonardS
Expert Alumni

how to calculate the business portion of rental property

The period of rental use will be from when you first rented the condo, October 2010, until the tenants moved out in September 2018.  The time from when the tenants moved out to when the condo was sold does not count as business use because the condo was not available to be rented.

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Carl
Level 15

how to calculate the business portion of rental property

Since the last occupant to move out of the property prior to the sale, there's really no reason the property can't remain classified as rental property. The only thing is, on your 2019 return after you import the rental stuff from your 2018 tax file, do not select the option for "I did not rent or attempt to rent this property in 2019". If you select that option, you will be "FORCED" to delete the SCH E from your 2019 return. You will also select the options to indicate that you "converted this property to personal use in 2019" and "I sold or otherwise disposed of this property in 2019."

Just indicate it was rented zero days, with ***ZERO*** days of personal use.  Rental income will be ZERO.

There will be no rental expenses. But you still have to work through the expenses section in order to enter the mortgage interest, property taxes and insurance paid.

Next will be the "Sale of Assets/Depreciation" section. Work through each individual asset one at a time and when asked if you stopped using this asset in 2019, select YES with a stop/disposition date of 1/1/2019. This stops depreciation on 1/1/2019.

You will also indicate that you sold or otherwise disposed of the asset in 2019. Then on the "Special Handling Required?" screen, select NO. Then you will be asked for your sales information on that particular asset.

Take note that with the above you are *NOT* asked for percentages on anything. But if you are asked for percentage of business use on any screen, your answer will be ONE HUNDRED PERCENT business use. This is because you are being asked for the business use percentage FOR THE TIME IT WAS CLASSIFIED AS A RENTAL. What you did with the property while it was personal use *DOES* *NOT* *COUNT*.

Now the above is the preliminaries. Below are a bit more specifics that matter big-time, if you have more than one asset listed in the "Sale of Assets/Depreciation" section.

This is a boilerplate response below. So that's why I provided more specifics for your particular situation above.

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 have 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.

 

nangua825
Level 3

how to calculate the business portion of rental property

if the time when tenants moved out until the condo was sold counted as personal use, i also paid mortgage interest, insurance,  real estate tax for the condo in 2019, can I include those as cost basis? because I don't see anyplace that I can report my 1098 for this condo 

nangua825
Level 3

how to calculate the business portion of rental property

does it also mean the time I lived there April 2007- Oct 2010 , and the time rental is vacant before sold counted as personal use? 

DianeC958
Expert Alumni

how to calculate the business portion of rental property

Yes, if the property was not being rented or available to rent, it is counted as personal use.

 

Topic No. 415 Renting Residential and Vacation Property

 

@nangua825

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nangua825
Level 3

how to calculate the business portion of rental property

like you said, after i  select the option for "I did not rent or attempt to rent this property in 2019" SCH E was deleted from your 2019 return. now i want go back report as rental sale but it lost all my rental history with depreciation and suspended PALs for that property. how can I get the history back? 

VictorW9
Expert Alumni

how to calculate the business portion of rental property

To enter Passive Activity Loss Carryovers from a Prior Year for your Rental Property in TurboTax Premier

  1. Click the Federal Taxes tab
  2. Click Wages & Income
  3. Scroll down to the Rental Properties and Royalties section
  4. Click the blue Show More in this section
  5. Click Start (or Revisit) next to Rental Properties and Royalties (Sch E)
  6. Click Yes
  7. Click Continue
  8. Click the blue Edit button next to the rental you'd like to add info for
  9. Click Continue until you reach the screen entitled Do any of these situations apply to this property?
  10. Scroll to the bottom of this page and check the box next to I have passive activity real estate losses carried over from a prior year.
  11. Click Continue
  12. You'll be able to input the carry over amounts on the next screen (you will need form 8582 from last year)
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