I sold my residential rental property last year, what numbers should I fill in for the asset sales price, land sales price and expenses?

[John1635]

I sold my rental property last year.  It was bought in 2004 for $291,000 then rented out in 2010 valued at 265,000 until I sold it in 2019 for $385,000.  it was 100% business. 

Sales Information
Enter the following information about the sale of this asset.  You must divide, or allocate the sales price and expenses between the land and the asset (improvement) based on their fair market values.
Asset Sales Price (Business Portion Only) _________
Asset Sales Expenses (Business Portion Only) ________
Land Sales Price (Business Portion Only) ___________
Land Sales Expenses (Business Portion Only)___________

I've done everything in TurboTax for well before 2010 - the land value from last year is $77,600 and the cost when I started was $265,000 and depreciation last year was $57,641.  The expenses for the sale was $26,755 excluding the taxes.

Question 1: What number should be for the asset sales price? Is it $385,000 or $385,000 less the land value of $77,600? 
Question 2: What number should be for the Asset Sales Expenses?
Question 3: What number should be for the Land Sales Price?
Question 4: What number should be for the Land Sales Expenses?

TurboTax is estimating I owe over $22k in taxes and I'm confused how it could possibly be that high.  Seems the original purchase price should be in there somewhere...

[KrisD15]

When it became a rental, you should have valued the building and the land separately.

(so in 2010, you would have split  the 265,000 value between the land and building)

Use those same numbers.

The expenses would be things like commission and closing costs, not property taxes paid at closing. Those would be rental expenses. 

Land does not depreciate, so if the value is 77,600 on your Schedule E, that is what you valued the land for in 2010.

That means you valued the building at 187,400.

You can have a realtor help you split  the selling price of 385,000 between land and building or use the same percentages 71% building 29% land if that makes sense. You can use this percentage to split the "selling" costs as well. Be sure to subtract closing costs that are not selling costs, such as taxes and insurance. 

So 273,350 selling price building, 111,650 land for sells price. 

Remember that besides the Capital Gain for the profit, you have to "Recapture the depreciation" (pay the depreciation back). 

Depreciation recapture

[MichaelL1]

1)  If you are entered the sale in the step by step mode (not on the assets worksheet) you will enter the Sales Price as $385K, and then it will ask you how much is allocated to land.

2)  Take the % you allocated to the building versus the land and multiple that by the Sales Expenses.  So for example is the land is X % of total cost then you take that by the total sales expenses.  So X% to land and reminder to the building.

3)  29.3% of ordinal purchase price was allocated to land.  So unless there were land improvements or an appraisal giving a different percentage, you would allocated 29.3% of the sales price or $112,805.

4)  29.3% of sales expenses to Land, or $7,839 ($26,755 X 29.3%).

Why are taxes approx. $22K, you sold it for $120K more than you paid for it, and then after sales expenses, still a profit of $94K , then you reduced the basis in the rental by depreciation taken of approx. $57K so $22K actually seems a little low, however I have no idea what other income you have, or your filing status (single, married, etc).