Critter's comment applies to the main structure only. If you did any capital improvements less than 27.5 years before the closing date of the sale, then those improvements are not fully depreciated. So it's perfectly possible your total cost basis will not be zero.
Glad to hear that you were able to confirm you did in fact, depreciate as required by law. If you really had rented the property for 30 years without taking depreciation, then even the gain on the sale would not be enough to pay all your back taxes, penalties and fines.
If you just follow the guidance below to report the sale, it should be no problem. The below guidance assumes the last occupant to move out prior to the sale was a rental tenant.
Your taxable gain on the sale is determined as follows. Understand the information is *ROUGH* and not all inclusive.
- What you paid for the property, plus what you paid for any capital improvements. From this total you subtract the total of all depreciation taken. This gives you your adjusted cost basis.
- Subtract the adjusted cost basis from your sales price, and this is your preliminary gain on the sale.
- Subtract from the gain the total of all of your carry over losses and your sales expenses. This total will be your taxable gain on the sale.
If the last occupant to move out of the house prior to the sale was a rental tenant, then *DO NOT* convert the property to personal use prior to reporting the sale.
If the last tenant moved out in 2018 and you sold the property in 2019, then DO NOT select the option that reads "I did not rent or attempt to rent this property 2019". If you select that option, then you will be *FORCED* to delete the SCH E from your 2019 return and you will lose *EVERYTHING* including all carry over losses and depreciation.
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.
