Sold my rental property in 2021, how do I handle the capital improvements over the years shown on Form 4562?

[Flagship]

When I inputted the sale of my rental property in Premiere, the depreciation recapture and capital gains made sense to me. 

1-Where do I enter the property survey and title insurance costs and on which form when I bought the property in 2003 to offset the cost basis?  

2-What happens to Form 4562 which is a list of depreciated items for the house and property during my ownership?   Do I have to go through those items one by one (for example: bathtub, kitchen stove, heat pump) and dispose of them on the rental property sale date?   Or, does Form 4562 and those items go away on their own with the reported sale of the rental property on the 2021 tax filing since it applies directly to the property?   Thank you!!!

[ColeenD3]

Ideally, you would have entered the settlement fees to the basis when you first began tp record the rental information. You have no choice but to add them to the sales fees now.

Yes, the depreciated items will take care of themselves. You sold the entire property, assets included, for one single amount.

[Mike9241]

for improvements listed as assets, you must allocate part of the selling price and selling expenses to each. otherwise, they will not be treated as sold with the result you gain will be overstated by their net tax basis.

for improvements, you did not add to the assets and did not depreciate see a tax pro. the tax laws say you must compute your gain based on the depreciation that would have been allowed.  the only way to correct this issue is to file form 3115 with your return. 

[Carl]

Here's the guidance on that.

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  2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" 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 if it's zero. Then you MUST work through the "Sale of Property/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 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" 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.

[Flagship]

Also, yesterday, I received a FORM 1099-S showing the Gross Proceeds of the sale.   I can't find where to enter that form info on Premiere.   Thank you for the detailed response on my sale questions.

[Carl]

You really don't need to enter the 1099-S anywhere. But the fact you got one, means the IRS is expecting you to report the sale, weather you need to report it or not.

The 1099-S shows gross proceeds paid to you at the closing. The total of those gross proceeds may or may not be taxable. it also may be less than what your sales price was to. Typically, the 1099-S will show less than your sales price, since the amount of the sales price used to pay off any existing mortgage is not generally included on the 1099-S.