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anarinsky
Level 2

How to file taxes for converting a 2-family house into condos and selling one apartment?

I had one 2-family  house for couple of years starting from 2018, then converted it into 2 condos in 2020. I sold one apartment that  I lived in and moved into another condo (apartment). I do not understand at all how to fill in in TurboTax.  The very first questions are perplexing, for example, how long I lived in the house, how long it was rented? 

My understanding is that I can sell my apartment without taxes and the 2nd apartment should be converted from rental to primary, correct? How to do this? In the previous years the house was described as a mix of own/rental  

3 Replies
Hal_Al
Level 15

How to file taxes for converting a 2-family house into condos and selling one apartment?

You probably need to talk to a tax attorney.  One requirement, for the tax free sale (technically, exclusion of the capital gain), of your primary residence  is that you must have  "owned" and lived in the unit for a full two years (730 days, 731 with a leap year). One question, requiring a legal opinion, is did your two years of ownership not start until the legal  conversion date. 

tagteam
Level 15

How to file taxes for converting a 2-family house into condos and selling one apartment?

In addition to what was posted by @Hal_Al, you might want to have your taxes professionally prepared since TurboTax may not handle your particular scenario correctly (at least not without resorting to Forms Mode and, possibly, doing overrides on some forms and worksheets).

Carl
Level 15

How to file taxes for converting a 2-family house into condos and selling one apartment?

My understanding is

From the way I interpret your post, all (and I mean all) of your understandings are wrong. But hey, it's not like you learn this stuff through osmosis. I know one thing I tell my clients in my computer business is that if you're not screwing something up, you ain't learning anything new.

But when it comes to taxes, mistakes can (and usually will) cost you money. For your situation, this is not the time to start learning. How you do things depends on how you did things on your 2018 and 2019 taxes. as well as your 2020 taxes if you sold a property in 2021. You should (and probably need) to seek professional help for this. Professional help is especially called for if your state also taxes personal income, as getting things wrong on the federal and state return will be a double-whammy for you. The potential back taxes, fines, interest and penalties that could potentially be assessed would make the cost of professional help seem like a pittance in comparison. Please seek professional help for this issue.

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