It is possible to pay a gain on the land portion? When we converted our Condo to rental back in 2012 we took the FMV at the time of conversion of $54,700 because it was lesser than the original purchase price of $128K, even if we allocated out building portion of 75% that came to $96,000. Then we allocated out building for depr and land from the $54,700. Looking at the tax assessment it was 75% building and 25% land. So for the building portion it came to $41,025 and for land we took $54700*.25 and have land $13675. Fast forward we sold the rental property Jan 2019 for $104,000. For sale price we allocated out building 75% which shows sales price of $78,000 and the remaining $26,000 went to land sale. We know that land is never depreciated.
So our calculation shows sale of land for $26,000 minus $13675 gives us a gain of $12,325.
Is the correct? We will pay tax on $12,325?
For our Condo sale, we didn't have a gain or loss. Our Sale price was between the two cost basis. For the sale price it was $104,000 but we separated out the building and land portion, so for sale price we used $78,000 and $26,000 for land - is that correct?
And for the cost basis we started with the $41,025 not the $78,000 and added in closing costs and then calculated for our tax loss basis and for our tax gain basis.
This is how we determined we did not have a gain or loss
line 1: Purchase Price: $96K (128K original Price but we separated building 75% and land 25%)
line 2:FMV on conversion date: $41,025 (FMV was $54,700 again we separated building 75% and land 25%)
Line 3: Depreciation: $8,076.00
Line 4: Basis for tax loss: $32949 (41,025 minus $8076)
Line 5: Basis for tax gain: $87,924 ($96K minus $8076)
Line 6: Sale Price: $78,000 (Original Sale was $104,000 but I separated out building 75% and 25% land)
Line 7: Tax Loss line 4 excess over line 6 = NO
Line 8: Tax Gain line 6 excess over 5 = NO
This is correct on we determined no gain or loss
And then came the land portion, we are not sure if we calculated it correctly to where we will pay a gain on the LAND portion.
Any help will be greatly appreciated
Thank you.
