where to enter depreciation recapture (which form, and line, etc.)?

[GreenApple123]

I have sold one of my 3 rental properties in 2018 (did not attempt to rent for 2018, straight going for sell, and it was sold in March 2018). This property was placed for rental in late 2015. For 2016, I have passive loss allowed. However, for 2017 and 2018, I am not allowed to take passive rental loss, therefore I have accumulated suspended passive loss.

So, I assume since I've sold the property in 2018, I can deduct my suspended passive rental loss. However, I still need to report all the depreciation (2016,2017,2018) as a form of depreciation recapture. The amount should be treated as regular income? If so, where should I enter it at TT?

Many thanks.

[Critter · Accepted solution]

Ok ... so you had a rental property that sold in 2018 so you must be completing the 2018 return.  In the Sch E section for the sold rental you will indicate it was sold in the asset section and the depreciation recapture will be done automatically on the form 4797.   You must indicate the property was a rental for just 1 day so the sch E is produced and not removed.  Follow the screen instructions carefully and the suspended losses will also be released. 

[GreenApple123]

Sorry, I meant the property was sold on 3/19 and I am working on the TurboTax 2019. 

I did all that except the 4797 only deducted the suspended passive rental, it did not recaptured depreciation for all the passed years. Besides, these recaptured depreciation is supposed to be treated as regular income?  If the amount are to be included on 4797, that will be governed by capital gain rules?

much appreciated 

[Critter]

Much of the program is still not functional ... the form 4797 will not be fully operational until 1/23 ... wait for it. 

[GreenApple123]

I also noticed a weird situation with TT2018 (since TT2019 is not stable yet).

As I mentioned that I have 3 rental properties, property 1 is sold, and property 2 and 3 are still active rentals. And I am not allowed to have passive rental loss.

So, when I go into Property 1, select Property Profile, mark property as Sold.... all is good (I went to check Schedule E, Property 1 now has shown suspended passive loss (which should be the case, as I have sold the property).

However, when I continue to the Assets/Depreciation portion of Property 1, and enter sale date, sale price, etc.. Suddenly on Schedule E, both property 2 and 3 suddenly allow Deductible rental real estate loss (instead of showing zero on Deductible rental real estate loss) as if all three properties are "bundled together"?

Thanks

[Critter]

Look again ... once you sold the property and if it lowered your AGI the formerly unallowed losses are now allowed ... review the entire return again especially the passive loss form and sch e. 

[GreenApple123]

thanks for your help and quick reply.

I don't think it's the AGI...  Could TT think that all 3 properties are aggregate together? I vaguely remembered that there is a rule that you can elect to consider multiple properties to be considered as one (in determining the Active Participant rule) which I never did, all my 3 properties are separate.

Thanks

[Critter]

No... if they are listed as 3 separate properties on the Sch E then that is not the issue.  All I can say is review the mock sale return over carefully  and maybe seek local professional guidance or call TT support for more guidance since I cannot see your return. 

[GreenApple123]

you are right!!

I find out since due to the depreciation recapture, the sold property has incurred big income (4797), so that the property 2 and 3 loss are now permitted!!!

Thank you so much!

[Critter]

You are welcome ... it is interesting how one piece of the puzzle will affect the rest ... now you know what the 2019 return should look like. 

[GreenApple123]

You are amazing!  Thank you so much for your patience with me!

Yeah, I got the picture! Thanks again!