Improvements made to rentals during year of sale... How to enter information?

[nsbohm]

I apologize in advance for the length of this...

I'll try to keep this simple (with simple #s)...

- Stopped renting out property in March 2019

- Finished improvements of $30,000 on 11/10/2019

- Sold property for $100,000 on 11/15/2019

I've tried entering the $30K (use the 2018 TT and 2018 dates) for improvements several ways and get different results. I'M NOT CERTAIN WHICH WAY IS CORRECT (or if it should be entered a different way)!!! Here's what I tried and my thoughts...

1.) On the 'Your Property Assets' page I entered sale price (100K) and expense (10K) information on the asset (the property) I've been depreciating.  Entered $30K cost as a NEW separate asset and DID NOT MARK THIS NEW ASSET AS SOLD...  Resulted in the highest taxes owed (of my trials)...  I don't think it counted this $30K asset as a cost against the sale of the OVERALL PROPERTY (which now has 2 'assets').

2.) On the 'Your Property Assets' page I entered sale and expense information on the asset (the property) I've been depreciating WITH THE SALE PRICE AS $70K  (100-30).  Entered $30K cost as a NEW separate asset and also marked it as sold with price of $30k and expense of zero (using dates above)...  Resulted in the middle amount of taxes owed (of my trials)...  I think this may be correct.

3.) On the 'Your Property Assets' page I entered sale (100K) and expense (10K) information on the asset (the property) I've been depreciating.  Entered $30K cost as a NEW separate asset and also marked it as sold with price of zero and expense of zero (using dates above)... Resulted in the lowest taxes owed (of my trials)...  Not sure what happened here... TT told me I had a capital loss (I assume for the 30k which I 'sold' for zero).

As stated I think option #2 is correct (i.e.  there needs to be a 'price' against each asset which add up to the total price) but would like confirmation from an 'Expert' before I proceed with estimated tax payments.

Thank you in advance for your advice.

[Carl]

Looks like #2 is the correct one, if I'm interpreting your post as you intend me to interpret it.

Basically, you will enter the property improvement as it's own physically separate asset. Now I "think" you have to give it an in service date. If you do, that's fine. give it one. Then where asked for business use percentage, enter zero percent. If it won't take zero percent, it will take 0.01 or 0.1 percent. With an in service date of say, a few days before you sold it, no depreciation will be taken, meaning there's no depreciation on that specific asset to be recaptured. Since in reality it was never "in-service" before you sold it, this will make the numbers correct.

[nsbohm]

Thank you Carl!!!!

I played with your suggestion and found that as I reduced the percentage it increased the taxes (no mater what was opted for wrt personal use/or not).  When I used 1% business usage the taxes were 8,000 greater than when at 100% business usage.

In reality, this has always been a 'business' (whether we had tenants at any given time or not) so 100% feels right.

I'm unsure why there's such a big difference when the % is adjusted, since the implementation date of the 30K improvements were 5 days prior to the sale date.  Maybe an issue with the software?   Or more likely I'm still doing something wrong?