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Level 1

Rental Property Sell - Asset vs Land Allocation

I need a clarification on a Rental Property I sold in 2019. In Turbotax under "Sales Information" it asks to allocate sales/expenses between the asset and the land. The question I have is if the asset sales price is total price to include land + home. For example, if I sold the property for $197K and $50K was what the land was worth would I use $197K for asset sales price and $50K for land sales price? Or do I need to subtract out the land sales price so asset sales price is $147K and land sales price is $50K; therefore this would add up to what I sold the property? 


I researched most of the questions but i did not see this particular question asked or discussed.  

3 Replies
Employee Tax Expert

Rental Property Sell - Asset vs Land Allocation

If you sell the whole property for $197k, then you would allocate $50K of the sale price to Land and $147k to the rental home. The sum must equal your total sale price.

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Level 15

Rental Property Sell - Asset vs Land Allocation

It's weird. When you first purchased and entered the property in Turbotax, the program asked for the the total price you paid. Then it asked you to enter how much of that total price was for the land. That's why it's confusing at times when you sell the property.

When you sell the property  you are not asked to enter the total price you sold it for. Instead, you are asked how much you sold the land for, and how much you sold the structure for. The total of those two should add up to your total sales price.

Then, if you have other depreciable assets listed, you have to allocate the structure sales price across those assets. The sale price of the land is "NOT" allocated. There's a reason for this too.

Since land is not depreciated, you can't allocate the sales price of the land across other assets that are depreciated.

To further complicate things if you have other assets listed, as stated earlier you'll allocate your sales price of the structure across those other depreciable assets. Here's the catcher. If you sold the property at a gain, then you have to show a gain on all assets - even if that gain is only $1 on some assets.

Likewise if you sold the property at a loss, then you have to show a loss on some assets - even if that loss is $1 on some assets.

Failure to do it this way will result in a loss on some assets and a gain on others. This sometimes (though not always) result in an incorrect bottom line on the 8582, which in turn carries over (indirectly) to the 4797. In the end, the SCH D will not be showing the correct amount of taxable gain or deductible loss on the sale.

Just keep this in mind about the depreciation recapture.

-Recaptured depreciation on an asset, is added to the sales price of that asset. So if sold at a loss, make sure that your sales price of an asset plus the recaptured depreciation on that same asset, is less than your original cost basis in that asset. Otherwise, it's reported as a gain on that asset.

*he who claims to totally understand the situation and all aspects of it, is obviously not paying attention*



Level 15

Rental Property Sell - Asset vs Land Allocation



Depreciation allowed or allowable is subtracted from the cost basis as shown on Form 4797.

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