Selling rental property - selling price explanation unclear

[flaming8]

Currently in Turbo Tax and at the entry where it is asking me to fill in the 'asset sales price'.   Then also 'asset sales expenses'.       I sold the property for 162,000,   received 110,000 in cash.   This was after all selling expenses and commission and also payoff mortgage of 50,000.      What do I put in for a 'asses sales price?'.    Would appear by the help instructions '110,000'.   However then the 'asset sales expenses' tells me to total all my expenses which seems contrary as the 110,000 is after all those expenses.    TOTALLY Confused.    Can anyone shed some light on this?     Thank you.

[Carl]

What you actually received "in cash" is completely irrelevant for tax reporting purposes. Your sales price is the contracted amount you sold the property for.

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 ahve a selection on it for "I sold or otherwise disposed of this property in  2018". Select it. After you select the "I sold or otherwise disposed of this property in 2018" 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.

[flaming8]

I agree with everything you said.  However my problem was with the explanation of what to enter into the field called "asset sales price"   When I clicked on that (in blue) for an explanation of what to put in that field, it said the "cash you received".     I think this should be changed.    Because the CASH I received when I walked out of the closing was $110,000 not the actual price for what it sold for.    That was the net after all expenses and paying off the balance on the mortgage.       Since posting this, I entered the price it sold for and than in the 'asset expenses' I entered all expenses minus the mortgage payoff.    I believe that is the correct value that needs to be in there.         What maybe better in the asset sales price explanation is to enter the 'sold price' or something like that.  

Thanks for responding.   

[WalkByFaith]

I agree - the help section on this topic needs help. I've been struggling with this for two evenings - need a lot more clarity around how you handle things that can be taken off against the sales prices and how to factor those in (e.g., real estate commissions for the sale of the rental property). 

[ColeenD3]

@ There is an entry point for the sales price and another for expenses of sale. Your sales price is the contract sales price listed on your HUD-1. You do not adjust this price manually.

Sales expenses include:

 - commissions
 - appraisal fees
 - broker's fees
 - legal fees
 - advertising fees
 - home inspection reports
 - title insurance
 - transfer taxes or fees
 - geological surveys
 - loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:
 - mortgage payoffs
 - home equity loan payoffs
 - rent-back costs
 - payoff to creditors
 - property taxes
 - home owner association fees

[luvtofly2]

Hi Coleen, 

You said when we enter the sales price of our rental that it needed to be the price on the HUD statement.  When I did this, however, my tax refund dropped. It does not seem right that I am not able put the loan payoff amount anywhere and I have walked through this section twice. It is calculating a large profit when there wasn't one.  I am also confused about the land sales price. 

Sales expenses include:

 - commissions
 - appraisal fees
 - broker's fees
 - legal fees
 - advertising fees
 - home inspection reports
 - title insurance
 - transfer taxes or fees
 - geological surveys
 - loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:
 - mortgage payoffs
 - home equity loan payoffs
 - rent-back costs
 - payoff to creditors
 - property taxes
 - home owner association fees

[DeanM15]

You should enter the total sales price on your rental house that is on your HUD statement. You will need to divide the total sales price between the land and improvements as well as any other assets. There is a place to add sales expenses. 

There is no deduction from the sales price for paying back your loan. You should have taken a deduction for the mortgage interest each year you were operating the house as a rental. 

Rental houses often wind up with larger tax bills than people think, especially if they have been held as a rental for a while. This is due to depreciation recapture where the depreciation that you took or could have taken on your Schedule E translates into a higher tax bill. More information here.