Asset Entry worksheet Error 1250 applicable % should only be completed if property type is real property

[TaxFart]

I sold a property and have an error on the Asset entry worksheet.  See image below.  How can I get rid of this? How can I find the data source for this?  Right clicking shows a data source which is greyed out.

Thanks.

[DianeW777]

You should be able to right click and enter a zero, then move forward.  It could cause you to file by mail.  My advice would be to go through the assets that were sold one by one to see if you see an entry that doesn't make sense, For this you should go through the 'Step-by-Step' and not Forms entry.

If this is associated with rental real estate, go through each asset, including the building (and land which is the same asset) to be sure you have included the selling price/selling expenses for each asset.

Below is an example of how to arrive at the selling price for each whether or not it's rental property.

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. (Choices would also be fair market value on the date of the sale or adjusted basis on the date of the sale, which is cost less depreciation.)

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

[AmeliesUncle]

Did you type 0 for the percentage?  Have you tried deleting that number (so it is BLANK, not zero)?

[TaxFart]

Yes tried those - it would not let me leave it blank and while I can type in O and O%, I still get an error :(

[TaxFart]

Thanks!  Your tip to go through and check all entries again was really useful.   I checked it all and found the problem.  See below- somehow the property type was set to Trade or business and it should be Real Property.

It's really annoying that the Turbotax program can detect errors by checking for various reasons for errors, but it only tells you there is an error and holds the reason hostage.

Anyway thanks again.

[AmeliesUncle]

Wait ... you had Section 179?

What exactly is this property and what was it used for?  What category of depreciation were you using?

If you had Section 179, I am pretty sure you DO have "additional depreciation".

[TaxFart]

Oh good point!   I had $1000 of addl depreciation which I could successfully ad on this worksheet.  

I wonder how to calculate the "applicable percentage" ?

[PatriciaV]

From the On-Demand Tax Guidance under Dispositions on the Asset Worksheet: "The applicable percentage should always be 100% except for certain low-income rental housing described in IRC Section 1250(a)(1)(B). "

You can read a full discussion of Line 27 by right-clicking the yellow box for Line 27b and choosing "About 1250 Applicable Percentage."

@TaxFart 

[TaxFart]

Thanks  for catching that.  You are right the applicable percentage should be 100% not 0%!!

BTW, I am entering $1000 as Section 179 depreciation allowed as that is the depreciation I took in 2022.

[PN10]

On the sale of a residential rental property, you go to the ‘Sales Information’ screen for each asset, and there is a field called ‘Property Type’, on which you can select from the following:

• Sec 1245 – Trade or business property
• Sec 1245 – Cattle or Horses
• Sec 1245 – Other livestock
• Sec 1250 – Real property

Question: Should ‘Sec 1250 – Real property’ be selected for all the assets including new fixtures and appliances such as new HVAC, new carpet, etc. ?

[DianeW777]

It depends.  If you complete the sale through the step-by-step, TurboTax will apply the correct IRS property. See the steps below and an example to arrive at the sales price for each asset.

1250 Property: 

• The residential rental property itself, which is real property, and any capital improvements that are structural components of the building and depreciated over 27.5 years.

1245 Property:

• Appliances
• HVAC (if depreciated less than 27.5 years)
• Carpet (if depreciated less than 27.5 years)

 You need to dispose of the property by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Click on Wages & Expenses
2. Scroll to Rental properties and royalties, click Edit/Add or Start/Revisit
3. Do you want to review your rental?, click Yes
4. Under Rent and Royalty Summary, click Edit
5. Click Update to the right of Assets/Depreciation.
6. Do you want to go directly to your asset summary?, click Yes and Continue
7. Click Edit to the right of each asset to be disposed of/sold
8. Go through several screens until you get to Tell Us More About This Rental Asset
9. Click on This item was sold…….   And continue to answer the questions

You might also review information here.

@PN10 

[PN10]

Thank you @DianeW777, the rental I sold is a house that I’ve rented out for thirty years, and it now has a list of about thirty Asset Entry Worksheets.

I re-imported last year’s return and started a new tax return, and using the Step-by-step to complete the sale, I took notice of whether TurboTax software defaults each asset’s Property Type to either ‘Real Property’ or to ‘Trade or business‘. From TurboTax ‘Asset Entry Worksheet’, every asset defaulted to the property type as you described with one exception -

• 1. Description of Asset: Sewer Line (House to Street)
• 5. Type of Asset: O – Other
• 23. Property type: defaults to ‘Real Property’
• 45. Depreciation Type: MACRS
• 46. Asset Class: 25
• 47. Depreciation Method: SL
• 48. MACRS convention: HY
• 51. Year of depreciation: 18

I suspect I may not have entered it correctly years ago when the asset was originally entered for depreciation. Would you recommend leaving this asset's property type as ‘Real Property’ or ‘Trade or Business’?

[DianeW777]

Yes, leave it as Real Property since it is actually attached to the house. TurboTax will tax any gain or loss appropriately.

@PN10