Rental converted to second home for 2.5 years and then sold in 2018. Turbo Tax won't let me say 0 days of Rental in 2018.

[Busdriver]

House bought back in 2004 and was rented.  Then in 2016 was second home.  Sold home in 2018.  Back in 2016, Turbo Tax had me delete the asset/home and made note of the Passive Loss Carryover.  Now while working on 2018, to enter the sale, TT is asking for the asset info that I have now entered, but it won't let me state that there were 0 days of rental in 2018 without an error that it should be more than 15 days or not reported here.  And it won't let me say 0% (has to be 1% or more) for the Line 6 Percentage of Business Use in the Asset Entry Worksheet.  This causes it to calculate depreciation for 2018 which is not appropriate.  If I say 0 days rented, then it wants to delete the asset even though I need it to sell it and take the Loss Carryover.  Seems to be a catch 22.  Am I doing something wrong?

[Critter]

If you are in the Rental section the you are doing it wrong ... you must enter the sale in the Personal Residence sale section the enter the total depreciation taken in the prior years as a rental ... you will NOT enter the asset again in any depreciation section.

If it is your personal primary home:

Enter your sale of your primary residence (which may require an upgrade in TurboTax), please follow these steps:

1. Once you are in your tax return (for TurboTax Online sign-in, click Here), click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Less Common Income”
5. Choose “Sale of Home (gain or loss)” and select “start’
6. You will want to use the "Easy Guide" to determine the adjusted basis on this home

Alternatively, to enter this sale of a second home in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on” (jump to full list)
4. Scroll down the screen until to come to the section “Investment Income”
5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section)
6. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select Second Home

[tagteam]

@Critter is correct; you can enter the transaction either way. However, the issue remaining concerns the passive loss carryover which, apparently, cannot be entered without entering the transaction in the rental section.

Thus, you should contact Customer Support if you are facing that issue since they might have a method to enter the passive loss carryover without entering an actual Schedule E rental asset.

https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632

[Carl]

I haven't read through all the responses so far. But my initial impression is that folks have you going around your elbow to get to your thumb.

Since the property was a 2nd home or personal residence in 2018 and was never ever ever a rental property in 2018, under no circumstances will you report this sale in the rental section.  You have to report the sale in the "Sale of Business Property" section. It's under the Personal Income tab (business tab if using Home & Business desktop or Self-Employed online version) under the Less Common Income section.

[Busdriver]

Thanks for all of the ideas.  It sounds like under no circumstances should I put the house/asset back in.  The only way I can think of to account for the passive Loss Carryover would be to adjust the cost basis of the sale.  To test, I tried deleting the house/asset for schedule E since it wasn't a rental in 2018 and then put the loss carry forward in as an increase to the cost basis.  When it reran the numbers, they came back exactly the same (except for the fed side which was a couple of dollars different likely due to the depreciation it was trying to apply to 2018 since it was forcing a 1% business use entry).  Is that an appropriate way to handle the carryover?

[tagteam]

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@Busdriver wrote:

Is that an appropriate way to handle the carryover?

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It is not really the appropriate way to handle the carryover, but it might be your best shot. 

However you want to handle this, do not enter the sale in the Sale of Business Property section. Since the property was not used in a business nor was it rental property at the time of the sale, you need to report it as the sale of a second home.

You will not get the Section 121 exclusion since it was not your principal residence, but you should get the benefit of releasing any passive losses that were suspended.

[Busdriver]

Thanks for the thoughts.  I did put the non-business % over the life of the asset in the Sale of a 2nd home section, but that section doesn't have a place to deal with depreciation, recapture, etc.  Per the instructions, I have to allocate the sale price to the 2nd home as a percentage of time it was our 2nd home, and the rest being allocated to the sale of a business asset from being a rental.  I can't figure out any other place to deal with the carryover other than adjusting the basis since it was not a business in 2018 but was sold in 2018.

[Busdriver · Accepted solution]

To close this out, I ended up talking with Turbo Tax support.  That was a very nice experience.  Since the house was not rented in 2018 at all, the thing to do is put 0 days for how many days rented and 0 days for how many personal days.  When they are both 0, it is happy.  Since it was not rented that year, it doesn't need the personal days for any calculations of personal vs rental use.  After that, no issues.

Thanks to everyone for their answers and the way to get to support.