Sale of a Rental Property - owned 50%

[plschneide]

I have a rental property that was purchased on 2004 and sold last year. This property was co-owned (I owned 50%). Each year I've been entering assets, depreciation etc. (Last several years entered, but due to being married, they had no effect on the taxes).

I've been using Turbo Tax desktop Premier

This year it was sold. Under sales information I was putting in the Sales Price (Business Portion only) and then Asset Sales Expenses, Land sales, land sales expenses.

I'm not really sure what to put here. The property was sold for more than the original purchase price but (bad investment) my gain was only about 10k over that period). When I just put in sales price (not accounting for me being 50% owner - not sure how to handle this) my federal tax due went up over 30k - so I'm sure something is wrong, as the tax increase was more than the profit over that long period.

I know I must be missing something on here as this is way off.

[AmyC]

I am not going into the "own 50% "issue which would indicate a partnership but instead focus on your questions.

1. Since married, you have been unable to deduct losses due to income. Those losses are taken when you dispose of the house.

2. Sales information - Enter half the sales price and half of the land value.

3. Gain creates large tax bill- once you change the sales price that will help. Next, look at how gain is calculated. 

Here is an example:

• Purchased house $200,000 - original basis of $100,000 for you
• Depreciation since purchase $65,0000
• Losses not allowed since you got married $10,000
• New basis in house $100,000-65,000 + 10,000 =$45,000
• Sold house for $220,000 - your share is $110,000
• Gain is $110,000 sales price minus $45,000 basis = $65,000 in income.

[plschneide]

Thanks so much.  Two follow up questions.

1. The difference between sale and original costs then works out to 19,500

However Turbo tax then increased my tax bill by a bit over 13,000. This doesn't quite seem right (sale was over almost 20 years - so long term gain....

2. Another section then says if I have any unrecaptured section 1231 losses in the last 5 years (which I do), enter them by entering 1231 carryovers in the search field in the toolbar at the top of the screen. Then select find button on the next screen check the box for nonrecaptured section 1231 losses and select continue.

There is a search button - not at the top but middle top right - typing that in provides "help" and doesn't result in where this text describes. I'm at a loss of where to enter that info.

[plschneide]

In addition it was suggested that I report all the sales proceeds on my Schedule D as long term capital gains, because the money for the sale was wired to my partner's account (not mine).

[plschneide]

For #2 it is under Sale of Business Property - update this and then you can select non recaptured section 1231 losses