Sale of Rental Property

[cllbrl]

I sold a rental property in 2019. Sales price was $40,000. Purchase price was $22617 with $5400 allocated to the land.  We made improvements (assests) while owning in the amount of $17,306. How do I calculate the amount of gain to allocate to Structure, land and improvement assests?

[DianeC958]

You can allocate the gain by taking the $5400 allocated to land divided by the purchase price of $22,617 that equals 23.87%.  Multiply the amount of the gain by 23.87% and allocate that amount of the gain to the land.

The improvements made to the property add to the basis the the rental property you do not report the gain separately to the Improvement Assets.  You would add the improvements to the building portion of the rental property so you only have gain on the land and gain on the building.

[cllbrl]

I went thru and completed the sale of the rental property and then went back to the asset summary screen and indicated that I had stopped using the asset. It then walked me thru inputting the sales info but now my sale has doubled? Where did I go wrong? 

I had sales price of $40000.00

Cost was $22617 with $5400 of this allocated to land

Prior depreciation on structure was $17034

Cost of Improvements was $17306

Prior depreciation on Improvements was $11835

Sales expense was $2400

[RobertG]

Depreciation recapture is limited to the gain on the sale.

By increasing the land value you may have increased the gain on the sale of the improvements.  

[cllbrl]

I entered the sale of the rental property first under Less Common Business Situations - Sale of Business Property

I did increase land value by using the percentage of .2387 that I was told to use. Once I completed this I then went back to my assets summary screen and selected that I sold the asset and it took me thru inputting sale information. Should I not have done both?  Instructions I was following said to do so.

[cllbrl]

I entered the sale of the rental property first under Less Common Business Situations - Sale of Business Property
I did increase land value by using the percentage of .2387. Once I completed this I then went back to my assets summary screen and selected that I sold the asset and it took me thru inputting sale information. Should I not have done both? Instructions I was following said to do so.

[KrisD15]

Since this was a rental, the land value would have stayed the same while the improvements would have depreciated. 

Now you will figure that gain by allocating the sale proceeds to the land and improvements (building and other assets). 

You could allocate a gain on the land, but it's usually easiest to allocate the land basis to the land and the rest to the improvements. 

(Sounds like you are allocating the land basis plus .2387 as the sale proceeds for the land, which will work out the same since the improvements will get the rest)

Either way, you will realize the same dollar amount of gain. 

Next you need to report the depreciation you took (or could have taken) on the improvements.