Sale of vacation rental property

[REBL]

I sold a house in March of 2019 that I have owned since 2014.  Beginning in 2015, the house was my primary residence for approximately 7 months of the year and a vacation rental the other five months (June - October).  I had no losses on this property.   As a result of the sale, there is a capital gain on the business portion and a capital loss on the personal portion.  Also, the property was not rented at all in 2019 since I sold it in March.

I also own two other vacation rental properties that each have suspended passive losses that are larger than the capital gain on the business portion of the sale.  It is my understanding that some of these suspended passive losses should be unsuspended due to sale - in the amount of the capital gain plus the depreciation on the property I sold.

If I tell TurboTax that the property was not rented in 2019, it deletes the asset entry sheet and says the sale must be entered as a sale of business property.  If I do this, none of the suspended passive losses are unsuspended automatically by TurboTax.  Is there some way to make this happen?

Also, the business use percentage for each of the years I owned the property I sold is different each year.  TurboTax offers no help with this aspect of the sale.  Does anyone have any suggestions about how to handle this? 

[MaryK4]

The tax rules provide that you may deduct your suspended passive losses from the profit you earn when you sell your rental property. To take this deduction, you must sell "substantially all" of your rental activity. If you own only one rental property and sell it, then you can take the deduction because that property is your entire rental activity. The same holds true if you own several properties and treat them each as separate activities for tax purposes. However, many landlords with multiple properties elect to combine them as one activity for tax purposes. In this event, if you own several rental properties and only sell one, you can't take the deduction because you won't have sold "substantially all" of your interest in your rental activity.

(Deducting Suspended Losses When You Sell Property)

[REBL]

Thank you for the information, but that does not answer my question.  I should be able to unsuspend some of the passive losses due to the sale.  The problem is that if I follow the instructions in TT, TT deletes my property from Sched. E because I did not rent it at all in 2019 and tells me to report the sale as a sale of business property.  When I do that, none of my suspended passive losses are unsuspended.

[JulieS]

You need to have a Schedule E in order to use the suspended losses, because they were listed in that section.

You also need to report the sale of your rental property in the Rental Income & Expenses section in order to correctly report the gain or loss due to depreciation. 

The way to get around this is to say that the property was rented at least one day, but don't report any rental income. This will preserve your suspended losses and allow you to report the sale in the section called Assets/ Depreciation in the Rental section. 

[disgruntled3]

If you all ready followed the TT instructions (not rented at all in 2019) and TT deleted your info (depreciation info), how do you get it back?

[DeanM15]

If you did not rent, or try to rent the property in 2019, then you do not have to worry about depreciation for 2019. you can look at your full 2018 return and get any depreciation information you need from there. 

You should find an Asset Entry Worksheet in the full edition of your 2018 tax return. This will contain the depreciation information that you require. 

To download a full set of your 2018 tax return, sign in to your TurboTax account. On the first page scroll down to the part that says Your Tax Returns and Documents, click on Show. Under 2018 click on Download/Print Return PDF. In the pop-up window, click on Considering Other Tax Solutions, then click on Accountant/CPA. You will then download a full set of documents. 

@disgruntled3

[disgruntled3]

Thank you for the info.  I have two issues.

1)  In 2019 sold a rental that was always a rental but did not rent it at all in 2019.  So, I clicked the TT box that it sold in 2019 and also the TT box that I did not rent or attempt to rent this property at all in 2019.  Apparently that second box click caused TT to delete all the info for this rental meaning the asset/depr list is no longer there, but I need that to record the sale in 2019.  Yes, I have print outs from 2018, so I have the asset/depr info, but where/how in TT do I enter the 2019 sale? 

2) In 2019 sold a vacation/2nd home that was a rental 2004-2017, used only for personal vacation/2nd home in 2018-2019, then sold in 2019.  When converted to personal use in 2018, TT deleted the asset/depr sch, but I do have print outs so I have the info.  Where/how do I enter the 2019 sale?

Thanks for your help.

[DianeC958]

You report both properties in TurboTax by going to

• Wages & Income
• Investment Income
• Stocks, Mutual Funds, Bonds, Other

When the program asks what type of Investment you sold, click Other.  Then report the information from the sale of each property separately.

@disgruntled3

[disgruntled3]

I followed that process, but the TT screens indicate that isn't the place to enter sale of rental property, instead use "Sale of Business Property section".  I found that and can enter the land part of the sale separately from the house and improvements part of the sale including the depreciation recapture, but I'm not confident TT will fill out the Form 4797 correctly so have to wade thru the screens and see what TT does with the info.

[ReginaM]

To enter the sale of your rental property and the sale of your rental in TurboTax follow these steps:

1. While in your Tax Home,
2. Select Wages & Income,
3. Select Review/Edit,
4. Scroll down until you see Sale of Business property, select edit/add,
5. You will be able to enter your depreciation on this page.
6. TurboTax will correctly complete Form 4797 for you.