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