Sale of Rental Property With Improvements in Turbotax Home and Business

[Chris V1]

I have seen variations of my question in some threads, but no definitive answer.  I have a rental property which has a number of improvements all entered into Turbotax and depreciation has been calculated for a number of years. Now I have sold the property. When I go into the Rentals and Royalties section, I click on the box to indicate that I have sold the property. Later it asks me for the amount of proceeds distributed across the land and building. But it does not include the basis of improvements, as adjusted for depreciation, in the calculation of gain/loss so my gain is more than it should be. I saw someone suggest that the proceeds should also be distributed across the improvements, but Turbotax does not provide a way to do that or flag that the improvements have also been sold, when I enter each improvement asset. This seems like a flaw in the software, but appreciate any further thoughts. 

[DianeW777]

All of the assets must be sold including the improvements, simply by going to each asset and indicate it was sold.  You should allocate the selling price and selling expenses across all assets and an example is here for you to help. 

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. If you want you can check the allocation of building and land in your county real estate tax office to determine the percentage of each.

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33%  (special capital gain treatment)

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

[Chris V1]

Many thanks for the response. I am not sure how to indicate that each improvement asset was sold. Turbotax only asks the question once for the property, but as far as I can tell, does not provide an opportunity to indicate that any of the improvement assets were sold. When I access the asset list where you add new assets, I don't see a place to indicate that any of the improvements were sold. Thanks. 

[Chris V1]

Thanks again. I looked at it again and I think I have it. For each improvement asset, when the question is asked if you used it for the entire year, if you answer no it asks you when you stopped/sold it. This is different than when it asks the question for the property, where answering No means you stopped using it for business sometime before it was sold. Thanks.