New Rental Property seems to be asking for an outdated form (HUD-1) for settlement agreement/closing document

[RichardMMMM]

I see that several of us are confused because we were not issued HUD-1, which is requested in the renter's section of TurboTax. This is for the section for rental income  to new rental property.

Because HUD-1 has not been used since 2015 and TurboTax is following the structure of HUD-1, I notice several people on this forum since 2017 have been frustrated because our closing disclosure follows a different structure and uses different vocabulary than the requested fields. See images at the end.

It seems like the TurboTax software is outdated.

I notice, that where TurboTax requests information from box L on HUD-1, there are other clients on here where this corresponds to our section C from our closing disclosure.

I will include a screenshot of the TurboTax form as well as my own section C. I will do my best to guess which part from section C corresponds to the box in TurboTax. 

Box 1 Abstract and recording fees includes includes C2

Box 2 Legal Fees, Title Search, doc prep includes C1

Box 3 Land Survey

Box 4 Title Insurance includes C5

Box 5 Transfer or stamp taxes includes C10

Box 6 Expenses/paid for seller

This means I am not sure where to list C3, C4, C6, C7, C8, and C9

Where should these go?

My document:

section c

As it appears in TurboTax:

TurboTax prompt using HUD-1

[Carl]

The major issue is that ever since the requirement for a HUD-1 settlement statement was eliminated, there are those closing companies that just "make up" their own closing document, literally "out of thin air". So it's perfectly possible that your closing costs aren't broken out at all. Now don't know if it will help, but here's the basics.

- Those costs associated with acquisition of the property are added to the cost basis of the property and depreciated over time. Examples would include (but not limited to) title transfer fees paid at the courthouse to change the name on the deed from the buyer to the seller.

- Those costs associated with acquisition of the loan are amortized and deducted (not depreciated) over the life of the loan. Expamples would include (but not limited to), loan application fees, points/pre-paid interest, and survey fees if (and only if) a survey was a condition of loan approval,

[RichardMMMM]

I don't know if you can see the photo I attached, but the costs are broken down in section C. Which turbotax boxes do those belong?

I understand that there is not a "standard" form, however I noticed other people on this forum have a section C just like mine so this might be the most common form for California.

[Carl]

@RichardMMMM there is nothing attached to your post or embedded in it. If you can't see it after posting, then no one else can see it either.

If you attempt it again, make absolutely certain that any personally identifiable information is removed from your attachments. The trolls will waste no time in using your personal information against you for their personal gain.

[RichardMMMM]

Thanks for the warning, there was no personal info in the screenshots I included in the post. I can see the snips on my end so thank you for letting me know they are not showing up are your own. Let me try something else, I will try replying with the photos. I think this is going to make it much easier to understand what I am asking.

[RichardMMMM]

Does this show up?

[RichardMMMM]

TurboTax prompt using HUD-1

How about this?

[Carl]

@VolvoGirl aren't you in CA? Can you help here? I certainly can't with this one. The only thing I know with any certainty is that escrow fees are not deductible anywhere.

[ColeenD3]

TurboTax uses these descriptions because the IRS uses these descriptions. If you can't translate what is on your closing document to what the IRS wants, you could ask your broker.

Fees and Closing Costs 

Some settlement fees and closing costs you can include in your basis are: • Abstract fees (abstract of title fees), • Charges for installing utility services, • Legal fees (including fees for the title search and preparing the sales contract and deed), • Recording fees, • Survey fees, • Transfer or stamp taxes, and • Owner's title insurance. 

Settlement costs don’t include amounts placed in escrow for the future payment of items such as taxes and insurance. 

Some settlement fees and closing costs you can’t include in your basis are:

 • Fire and casualty insurance premiums, 

• Rent for occupancy of the house before closing, • Charges for utilities or other services related to occupancy of the house before closing,

• Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994),

• Charges connected with getting a mortgage loan, such as:

 1. Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs),

 2. Loan assumption fees, 

3. Cost of a credit report, 

4. Fee for an appraisal required by a lender 

5. Points (discount points, loan origination fees), and • Fees for refinancing a mortgage.

PUB 523

[Carl]

Don't know if this helps, but I just managed to get a hold of what is called an "ALTA Combined Settlement Statement" With a number of pre-printed headings.

LOAN CHARGES - What I note is that items under this heading are all related to acquisition of the loan. I also note that not all of these items are allowed to be claimed, and it's not clearly identified on the form what can and can not be claimed. Some of the listed items are "questionable" to me because their "item name" is apparently not that common.  For example, there's one called "Processing Fee ($250 POC by others)"  with a total of $650.  Is this the application fee? I have no idea since there is no item listed for that elsewhere on the form.  The only two items clearly identified that I know for a fact are deductible are points, and pre-paid interest.

In the end, the allowed loan acquisition costs are amortized and deducted over the life of the loan.

IMPOUNDS - This appears to be things related to acquisition of the property that do not change the cost basis of the property. I see listed here HOA fees, property taxes and property insurance.

GOVERNMENT RECORDING AND TRANSFER CHARGES - This is a mix. Everything I see listed here is related to acquisition of the property with some items related to acquisition of the loan. But not every item can be claimed. For example, there's "lender's title policy" then "[closing company] title policy" and "Owner's title policy".  I know the owner's title policy can be claimed. But not sure about the others.

COMMISSIONS - Self-explanatory. I know the TTX program will specifically ask for this.

TITLE CHARGES - All of these items are related to acquisition of the property. But not all items listed can be claimed.

MISCELLANEOUS CHARGES - This is a mix, but from what I see (and it's not clear really) nothing listed on the form I have is reported anywhere as a part of the purchase/sale. It includes HOA fees, property insurance, and one item called "transaction fee" that is paid to the realty corporation. That 'transaction fee" is not a part of the commission paid to the realtor.

If the HUD-1 settlement statement wasn't confusing enough for many folks, then the ALTA Combined Settlement Statement most definitely is.

[Anonymous_]

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@Carl wrote:

....one item called "transaction fee" that is paid to the realty corporation....

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It is not a "transaction fee" and it is not paid to the realty corporation.

The fee is a transfer fee that is charged by some HOAs (or condo associations) to transfer the membership to the new owner. The fee is typically a debit to the buyer but that can change depending upon the HOA and the agreement between the parties.

[Anonymous_]

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@Carl wrote:

If the HUD-1 settlement statement wasn't confusing enough for many folks, then the ALTA Combined Settlement Statement most definitely is.

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The following is a link to a web site with some detailed information regarding the statement.

https://www.useelko.com/blog/alta-settlement-statement/

[Carl]

@Anonymous_ thanks for that. Good to have. Bookmarked.