Rental Sale - How to add back all old assets?

[RuffyK]

This is a follow up to https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/sell-rental-but-depre...

Short Version:
- Owned the rental for about a decade 
- Did not rent during 2024, but did major remodel during the year.

- Mistakenly took ALL assets out of service in late 2023 

- Sold property in early 2025

Background:
As a test I attempted to sell the rental in TT this year (2040) through 'sale of business property'. It asks for depreciation taken on the property, which I determined by adding last years (2023) Prior and Current Depreciation from the AMT Depreciation report. Okay fine, but...

Q#1
Is 'Business Items->Sale of Business Property' the correct spot to sell a rental when assets have already been converted to personal use?

Q#2

How do I account for other assets such as a roof or heat pump? Where do I add those into TT for depreciation recapture?  

Q#3

If I deleted assets from TT years ago, (because they were fully depreciated thus having zero effect on taxes, and I didn't know any better), do I need to go back through decades worth of taxes to find each one in order to add them back in in the year I sell the property?

Q#4

When does depreciation recapture officially stop? Does it stop when I convert the assets to personal property, or when I put the rental up for sale, or the date the rental is finally sold?

Q#4a - Will depreciation recapture occur during the time between conversion of assets to personal use, and time of actual sale therefor forcing me to miss out on depreciation which will be recaptured? 

Q#5

What form do I find out if the Oregon state depreciation was different from the Federal depreciation, and do I need to know that when selling the rental? After finding this Oregon information where would I enter it?

Thank you

[DianeW777]

Your answers are posted below for more clarity. Keep in mind that you will add any capital improvements to the cost basis of the building. Also, the land must be added as a separate sale with no depreciation.

1. Yes, it is a business asset with depreciation.
2. You can include all except land when entering your sale. Land will be a separate sale in the same location. See the example below.
3. You do not need to add them as assets, if they are of no value, you can give them a zero selling price which would eliminate depreciation recapture on assets that have no sale value.
4. Recapture never goes away until the property is fully disposed of through sale. No depreciation recapture is required for the period you did not use it as a rental after conversion to personal use.
5. There should be questions on the Oregon return if they do not follow federal rules for depreciation. Any differences would take place on the state return if applicable. See the information below.
   • Schedule OR-DEPR Instructions: Oregon is currently tied to federal law, but there are historical disconnects that might mean your Oregon depreciation needs to be calculated differently than federal depreciation. For each asset, figure both your federal and Oregon depreciation deductions for the year using appropriate methods.
     • MACRS is effective for assets placed in service on or after January 1, 1987 (see exception below for assets placed in service during 2009 and 2010). The method and life will be the same as you used on the federal return.

Example of arriving at the selling price and sales expenses for each asset in your rental activity.

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense. Next enter your sales.

Sale of Business Property: (First the building and any additional assets, then the Land in a separate entry with zero depreciation

1. Income and Expenses at the top
2. Scroll down to Other Business Situations
   • For TurboTax Desktop: Business Income and Expenses > Less Common Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information:
   1. Description of the Property (Machine Type)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Cost
   5. Depreciation