Residential Rental Property Improvements

[dlschroedr]

I have a Residential Rental Property owned and rented by myself.  I replaced the roof and furnace about a month before I sold it about one month later.  I entered these two improvements into the tax software as Depreciable Property.  When entering these two improvements into a tax software I need to enter the sales price.  However, the house sales price included the sale of these two improvements.  How do I determine the sale price of these two items or can I just enter "0"?

[Mike9241]

since these were installed so close to the date sold I would allocate enough of the net sales price (sales price less a prorata share of selling expenses) to equal the original cost.   so the only gain is equal to the depreciation allowed. 

[dlschroedr]

So to clarify.  I would then also when entering the sales price of the House, I would first subtract the cost of each of the items (plus a prorated share of the selling expenses) from the amount that I received from selling the house?

[Mike9241]

yes. so in total you don't report more than the actual sales price and selling expenses.  

[dlschroedr]

Thanks

[Critter-3]

Ok ... if an asset is placed into service AND sold in the same tax year then you will add the cost as a repair on the Sch E  and leave the entire sales price & cost of sale be be allocated on  the assets already listed.  You do NOT need to prorate the sale for these items.  

[dlschroedr]

Ok after reading Critter-3's message I found the following in IRS Publication 946 "• Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following
property.
• Property placed in service and disposed of in the
same year.

So are these assets clamed as repairs?

[Critter-3]

YES ... after 30+ years in the business, being  an enrolled agent  &  having taught the H&R Block income tax courses for many years  the correct place to put them is on the Sch E in the year of a sale.  That is how you get the deduction for it ... there is no other place to put it.