Cost of improvements not included in cost basis on form 4797 after sale of my rental property

[Hubby]

I have a Renovations asset that I added to my rental property in August 2020 for $19,000.  I added a new roof in September 2020 for $8000.  I sold my property in January 2021.  I have read many posts regarding allocation of sales price to all assets in order for Turbotax to calculate properly and I have followed these recommendations, hence I show a gain of $1 each for the sale of Renovations, New Roof, Land and a gain of about $100,000 on the structure.  Form 4797, line 21 shows my total cost basis as $196,000 which is comprised of the structure and sales costs of $176,000 and $20,000 respectively.  The $27,000 cost of renovations and roof is not included, hence overstating my gain.

I've tried drilling down to find the source of the $196,000 total cost basis but I can't get further than form 4797, line 21.  And of course I can't change that line directly.  I have two specific questions.

1. Is there any field in Turbotax questions or directly on a form where I can add costs of improvements to my cost basis.  I've seen similar questions asked but don't recall ever seeing a direct answer.  I'm assuming it's NO because I have searched and searched but still can't find such a field.

2. Of course my second question is a 2-part question; does anyone know why my renovations and roof costs are not included on form 4797 line 21?  How can I resolve this issue?

Help is greatly appreciated!  Thank you

[Hal_Al]

Rather than entering each asset separately, as an asset sold,  you can add them together.  You cost basis is the total of the cost of all assets and your depreciation taken is also  the total of all depreciation taken.  You have to do the totals manually. 

That's how I did it when I sold my rental.

[ColeenD3]

It would help to know all the costs, not just the renovation and roof. But, right off the bat, you do not put $1 for land. You would prorate the land and building as you did when you initially input the amounts.

If initially, the building was $100,000 and the land was 10% of that cost, you would break those amounts out and enter them. The total cost basis is $110,000.

Now assuming that the land and building values did not change percentage-wise, you would enter the same proration. If the property sold for $300,000, then $270k would be for the building and $30k for the land.

[Carl]

I would expect each depreciable asset to be individually listed in part III. The actual structure as item A , and the roof as item B.

[Hubby]

I can and will provide actual values.  I can even combine my two assets into one asset but that won't change the fact that my improvement costs are not included in the total cost basis shown on form 4797.  I can manually compute the proper gain on the sale of my property but I still can't figure how to force Turbotax to compute it properly.  

In 2008 I converted my home to rental with a structure cost of $176,000 and Land cost of $69,000.

In August 2020 I made improvements at a cost of $20,000 (asset named Renovations)

In September 2020 I replaced the roof at a cost of $7,900 (asset named New Roof)

Combining these two assets into one marginally simplifies things but neither creates nor solves the issue at hand.

In January 2020 I sold the property for $315,000 with Sales expenses of $19,000.

Sales price has been allocated as follows; $225,393 (structure) + $69,001 (land) +$7805 (new roof) + $12,801 (renovations) = $315,000.

Depreciation for each item is; $76,800 (structure) + $0 (land) + $96 (roof) + $7200 (renovations) = $84,096.

My adjusted basis for the structure = $176,000 (original basis) + $19,000 (sales expenses) + $20,000 (renovations) + $7,900 (new roof) - $76,800 (depreciation) = $146,100

Manually computed gains are as follows;

Structure: $225,393 - $146,100 = $79,293

Land: $69,001 - $69,000 (basis) = $1

Roof: $7805 - ($7,900 - $96)adj basis = $1

Renovations $12,801 - ($20,000 - $7,200)adj basis = $1

So I can manually compute my gains correctly but Turbotax apparently is not!  Turbotax is not adjusting the basis on the structure for the costs of the roof and renovations.  It is only considering the original basis and the sales expenses.  I have read many posts, and been told in this one as well, to do it manually but how do I get this adjusted basis in Turbotax?  Somehow it has to get to Line 21 on form 4797.  The answer to this specific question seems to be very elusive.  Does anyone know that specific answer?

[Hubby]

Carl, I think you are identifying my problem.  I only have item A.  Nothing in Item B or C for the roof and renovations.  Not sure what I did wrong.  Any suggestions?

[Hubby]

Carl. my roof and renovations show in part II (short term gains and losses)

[Mike9241]

the only alternative to @Hal_Al  suggestion is to allocate the sales price and sales expenses to each separate asset based on their relative fair market value.

[Hubby]

@Hal_Al , first, I mistakenly said sold my property in January 2020 when actually it was January 2021.  

Second, I can add up the cost basis manually and force form 4797 to show the correct cost basis by entering it as Asset Sales Expenses in the disposed of asset section.  Is that where you entered your additional cost basis? 

This value shows on line 22 of the Asset Worksheet for the property which is described as "Asset expense of sale".  I'm having a hard time getting this past my sniff test but it does work.  I and doubt the worksheet is being included with my filing docs.  Also, the program has the depreciation shown correctly.

I do have the new roof and renovations assets already included in my assets section so I'm still assuming I have to dispose of them through the program and allocate the appropriate sales price to show no gain or a small gain of $1.  If you handled it differently then a little more detail would be appreciated, thanks.

[Hal_Al]

Asset Sales Expenses are things like realtor commission, closing costs and fix up expenses.  Sales expenses is a separate entry from your cost basis. 

[Critter-3]

Did you ever enter those improvements is assets on the 2020 return? If not that's where your problem started so that's where the correction needs to be. Amend  the 2020 return and then carry forward the assets to the 2021 return so that you can properly sell them off.

[Hubby]

Yes, I did enter in 2020 and they pulled over in 2021.  I believe I just found my error and it is in my head!  It seems I was trying to adjust the basis of my structure for the cost of the roof and renovations when in fact those basis adjustments were made to the actual assets in Part II of form 4797.  Those assets show in part II because they were held less than 1 year.  If I were to somehow force the roof and renovations costs into basis of the structure then I would be double counting those costs.  Does my assessment seem accurate?

[JulieS]

Yes, your assessment sounds correct. It is normal for the structure, the land and the other assets to appear in different sections, so you have to add it all together to get a clear picture of the total gain or loss.