Capturing BASIS and Depreciation of Property Improvements on Rental Property Sales

[Todd66Z]

I am in the midst of selling all my rental properties. For the sake of simplicity I will use just one.

I sold a rental Property that I owned since 2010.  In 2013 we had a Hailstorm and I received an Insurance payment. I reduced my basis on the original asset like directed through the program and then added in the repair of the roof and siding as a new asset. I sold the property in 2022. I also had other assets that I depreciated for this property. How do I dispose of them and make sure that I capture the correct basis (and depreciation ) for this property. The program asks me about the sale of the property and I included that for the initial asset. I am unclear what to put in for the rest of the associated assets.

[DavidD66]

There is more than one way to allocate the sales proceeds received for the sale of your rental property.  I suggest you allocate the current book value of each asset other than the main structure to those assets, and then allocate the remaining balance to the sale of the main structure/house.  This will result in no gain or loss on the sale of the land, and each asset other than the main structure.  Any gain or loss will be realized on the "initial" main asset.  You could also do it proportionately, and allocate a percentage of the sales proceeds to each asset based on it's percentage of the total of the book value of all the assets combined.  

[Todd66Z]

Thanks David,

So I am trying to figure out the advantage/ disadvantage to either approach.  If I lump them all together and figure my Basis, I am looking at a 20% Gain on the Property. However, then I believe I need to recapture the depreciation which is about 30% because of the time held. If I instead Allocate the other expenses and just deal with the initial purchase basis, does this mean that I dont need to recapture the depreciation on the roof and other improvements? Would I be able to add the book value of the roof in to the basis?

[ZhuoliA]

You still need to recapture the depreciation on the roof and other improvements, no matter which approach you are taking. You can choose to sum up all the prior year's depreciation as one manual adjustment if you don't want to report the prior year's depreciation for each asset.