How do I fill out Tax form 4797 after sale of a rental property?

[bigbarr25]

Hello all,

I am trying to figure out how to fill out form 4797 for the tax year 2013. The duplex was purchased in 2007 for $240,000 and sold in 2013 for $251,900. It was used as a rental property the entire time and was never owner occupied. Here are the facts............

- Purchased in 2007 for $240,000 (Land: 50,000 Building: 190,000)

- Sold in 2013 for $251,900

- Fees associated with sale of the property: $13,500

- Depreciation over the 6+ years: ~$34,000

- No improvements were made to the property during this time

For line 20 (of form 4797) I put 251,000. I assume this is correct.

My questions is what do I put for line 21. Do I put the original cost of the building and land plus the fee's associated with the sale? Or is it just the building value (at time of purchase, plus associated fees). 

Where I am confused is that I am not sure whether to count this as 1 sale (building and the land combined) or 2 separate sales (building and land), and how this relates to "Part I" of form 4797.

Any help would be greatly appreciated! Thanks!

[CherylW · Accepted solution]

Dear bigbarr25,

I'm mocking it up right now, and the first thing I did was to separate the selling price into land and building.  If you don't have an exact breakdown, prorate the selling price based on the purchase price.  Make sure you allocate the selling fees, unless you have them already broken out.

The sale of the house goes in Part III of the 4797 as a Sec. 1250 Property.  The sale of the land goes on Part I of the 4797.  It gets combined on line 13 of your Form 1040 as a capital asset.

So the answer to your last question is this does count as two sales on your 4797, but one as a Schedule D capital asset.

Please feel free to post back to this thread with further questions--I'll leave my pretend sale in in case you need any more help.

Good luck!

CherylW

[bigbarr25]

Thank you very much for your response Cheryl! I am still a little confused as to how some of the forms are filled out. My 1099-S (proceeds from real estate transaction) shows 251,900. Does this go on line 20? What do I put on line 21? (building only? or building and land). The problem is that if it's only the building, I get a total gain of around 75,000 including depreciation which seems way too high. I hate to get so specific but I am still unsure as to what I need to put on Lines 20-24 of form 4797? Is it possible my 1099-S is wrong or do I figure out the land and building value myself from the total value? Thanks in advance!

[CherylW]

So when I did it, I got a gain of about $70k on the building, but I estimated the depreciation.

If by line 20, you mean the 4797, I put only the building, because that's the Sec. 1250 property.  I separated the sales price into land and building based on the purchases, and got $185,610 on line 20, and then on line 21 goes the sales price minus whatever you depreciated it at.  I used a number that's probably not exactly yours, since I don't know when in 2007 you purchased it.  Line 23 is the adjusted basis, and that subtracted from the sales price gives you the gain.  That's only for the building.

On line 2g goes the sale of the land.  Those have to be separated because you can't depreciate land.  The sales price of the land plus the house get added and carried over to Schedule D.

But that's really moot--you should be able to enter it as a sale of a depreciable asset in Turbo Tax and it should come out right, according to your 1099-S and your allocation between land and building.

It isn't really that much work to delete and re-enter the transaction, remember to prorate the land and the building--they're reported as separate items on the 4797, but come together again on the Schedule D.

This is a huge thing you're trying to do, if there's anyway you can leave it for the night and come back to it, I'd recommend it.  The worst thing is frustration.  I'll be here tomorrow to answer any more questions.

CherylW

[bigbarr25]

Wow! fantastic. I understand now, how I was getting the extra $40,000 profit. I was putting the gross sales price (property + building) on line 20 as opposed to just the building. On line 21 I was using only the building value for the initial cost. This is where the problem was. I did not know I needed to separate the land from the sale and initial purchase and divvy it up into Part 1 and Part 3. Thank you very much for your help! TurboTax see's the gains appropriately now

[ryn-kai-malo]

Is it necessary to separate land and house part of the sale? Where does say that on IRS code? Can I lump it all on form 4797 part III?

[motleyk]

Cheryl, I have a similar but slightly different case with FORM 4797.  Inherited house + improvement basis=$218698 in 2014 . Rented house in 2014.  Allocated $133406 to building, $85292 land. Sold house 2018 for 38100, 342900 land. Kicker is I had inappropriate depreciation of 9330 above straight line due to error in first five years of not using assessed value for allocation.  Heres where I get lost.

1)  In part III for the 1250 building calculation, I get a -66013 loss which carries to Part II according to Form Instructions but I think it should carry to Part I to net out against the 1231 land gain. Is this correct?

2) As part of this mess, the $9330 additional depreciation never gets recaptured because the above loss is handled per the instructions for line 26 of the form. Is this correct?

Any specific advice on filling out the form would be appreciated.  Have already spent hours.  Thanks

[Carl]

@motleyk you need to start your own new thread on this. I know you can't tell it without being "in the know" but you have posted an add-on message in a post that's over 4 years old. Here's how I know this.

I you look at all the post in this thread, you'll note the first 5 or 6 have a posting date/time of *EXACTLY* May 31, 2019 7:49 PM. There's no way possible for that multi-message exchange to have taken place that quickly. Nobody types that fast.

That date/time is actually the date/time the thread was transferred over from the "old" TurboTax message board to this new board. So please start your own entirely new thread on your issue so that someone will actually see it and hopefully respond to it. You're just the "luck of the draw" that I happened across this post.

[Chembukkavu]

Sir/Madam, I am a UK citizen, submitting IR1040 tax return I bought a property in Miami in March 2011for $82000 in May 2019 ,sold $154000. In the cost can I claim depreciation, indexation, and taper relief. What all forms I should submit?

I incurred loss $13000, in 2015, when I sold another property in  Davenport. Can I set aside that on 5he current gain.

[DaveF1006]

You cannot claim depreciation,indexation, or taper relief as cost adjustments. in fact, if you rented out the property, the depreciation that has incurred since the rental would need to be recaptured and would add to the ordinary gains on the sale of the house.  Also, if you incurred the loss from a sale of a property in 2015, that would have needed to be reported in a 2015 tax return. You would not be able to claim it in the current tax year. The only thing you can claim against the sale of the house are the settlement costs (selling expenses) that incurred at the time of the sale and the expenses that incurred when the bought the house. That will be addressed in the program.

Please review this Turbo Tax link for further information on the type of selling expenses that can be claimed.