Sale of Rental Property: Do I have the original cost entered correctly?

[Todd F]

I'm wondering if I have my numbers correctly input.  When entering the data for the sale of a rental property, in which I took a significant loss, it calculates a surprising capital gain.  This is a home I purchased and lived in as my main home for 3 years, then rented it for 4 years.  Please see the below screenshot for the following question:  Should the "Cost" line reflect the total purchase price of the property, or the total purchase price less the FMV of the land?

The reason I'm asking is that I originally had it reflect the total purchase price less the price of the land, and sold it for a $71K loss (Sale Price - Total Purchase price - Costs of sale).  When rolling the depreciation back in, it should still reflect a Capital LOSS of around $18K, instead Turbo Tax calculates a capital GAIN of nearly $50K.

When I changed it to what is reflected below, where now the "Cost" reflects the total purchase price of the home, and the "Land" is about 14% of that value, Turbo Tax then calculates and Capital Loss much closer to what I expected.  I'm sure this must be the correct way of doing it, I would just feel much more comfortable about it if someone could verify this is correct.

[AmeliesUncle]

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@Todd F wrote:

Should the "Cost" line reflect the total purchase price of the property, or the total purchase price less the FMV of the land?

The reason I'm asking is that I originally had it reflect the total purchase price less the price of the land ... When I changed it to what is reflected below, where now the "Cost" reflects the total purchase price of the home, and the "Land" is about 14% of that value, Turbo Tax then calculates and Capital Loss much closer to what I expected.

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Yes, it should be the TOTAL cost (building and land combined).

However, from what you said and from what your depreciation shows, you had the wrong numbers in before.  That means your depreciation has been wrong for the last 4 years.

That means two things:  (1) you need to enter the "prior depreciation" that you SHOULD have taken.  That is what the law requires.  (2) You can amend the last 3 years to claim the proper depreciation on those tax returns.