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Since I sold near the beginning of the year 2019 I did not have any renters during the 2019 time frame so from what I've been reading I should submit this under the Business Items section in TT.
Your reason of not having any rental income in 2019, is not a reason for reporting it in the business section. But you most certainly can if you want to.
If you did not live in the property for one single day after the last renter moved out, as your primary residence, 2nd home, vacation home or any other "personal pleasure" use, then you have absolutely no reason to convert the property to personal use on your 2019 tax return. However, if you did convert it to personal use on your 2018 return, then you are correct in that you have no choice but to report your 2019 sale in the "Sale of Business Property" section.
- Date Acquired - is this original acquisition date or converted date?
The date you originally purchased the property all those years ago, before you ever converted it to rental.
- Date Sold - 2/2019
THe exact closing date of the sale which is the day you and the buyer met with the closing agent to complete the process.
- Total Sales Price - 280000
Should match the sales price on your sales contract between you and the buyer.
- Cost of Property (or Tax Basis) Plus Expenses - 135000
What you paid for the property when you originally purchased it, plus the cost of any property improvements (listed in the assets/depreication section of the SCH E) that you paid for during the period of time you owned it. Doesn't matter if it was a rental or not at the time of the improvement. It still adds 'real" value to the property.
- Depreciation - 15000
For me, that's way to "round" of a number to be accurate. But of course, it could be. If you did "NOT" convert this property to a rental on your 2018 tax return, then you need the two below forms from the 2019 tax return. If you converted the property to personal use on your 2018 return, then you need the same forms from your 2018 tax return.
I am assuming you are reporting this sale in the "Sale of Business Property" section.
You need the two IRS Form 4562's that both print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation". For the most part, I only expect you will need data off the first one. But have the 2nd one handy in case the program asks for AMT depreciation.
Now add together for all assets the amount in the "prior year depr" column and the "current year depr" column. That total is your total depreciation taken. So that's why I question that your statement of $15,000 even, for depreciation is the correct amount.
Am I completely off in my understanding of what should be recorded?
Overall, my response is no. But I do see people "constantly" screw up the "depreciation taken" amount when reporting the sale in the Sale of Business Property section.
Regarding total sales price of 280000. Should I substract closing cost and other fees from this number?
No. If you're looking at the same screen I am (pictured below) the 5th item down tells you to add your sales expenses to your cost basis.
Regarding Cost of Property (or Tax Basis) Plus Expenses. I'm not sure what expenses that should be considered here?
Not clear on what you're not sure of, or why you're not sure. The 5th item down clearly states, "Cost of Property (or tax basis) plus expenses of sale"
Regarding Depreciation of 15000. I assume that this value is from the Schedule E from 2018.
Only if you "COMPLETELY AND CORRECTLY" converted the property to personal use on the 2018 return. Remember, it's not just the prior year's depreciation you have to recapture. You have to include the current year's depreciation in that total too.
One thing I noticed is that when I attempted to enter this as a Rental Section Sale the form distinguishes between the total sale Cost and the cost of the Land and it applied any fees associated with the sale in accordingly.
That's because the land is not SEC 1231 property is all. After the image below, I've also included guidance on reporting the sale in the SCH E section of the program. If you did not convert the property to personal use on your 2018 tax return, then i suggest you report the sale in the SCH E section per the guidance below the image. It's less work (though you still have to do some math manually - just like you do to report the sale in the Sale of Business Property section.)
Reporting the Sale of Rental Property
If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.
Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in 2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).
Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets. You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset. Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1
Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.
When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.
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