Sale of previous rented now vacant property

[jberry]

In 2018 we paid for demolition of a single family  residential rental property.  We had rented the property for the previous 34 years.  Property was fully paid  and depreciated.  In 2020 we sold the property as vacant land and received a 1099-S.  No rental income was derived from the property in 2019 or 2020.

Where and how do we enter this on Turbo Tax.  We have tested entries (on our  2019 Turbo Tax) for sale of property and  sale of rental property with no success.  Any advice is much appreciated.

[M-MTax · Accepted solution]

Get rid of the property is you had it listed in the rentals part of the program and list the sale in the stocks, bonds, and other part of the program as a sale of vacant land......the building was fully depreciated and the depreciation usually needs to be recaptured but the whole building is now gone....and worthless.

[Critter-3]

https://ttlc.intuit.com/questions/2583688-sale-of-a-second-home-or-land

[Carl]

In 2018 we paid for demolition of a single family residential rental property.

 Since the property was no longer rental property after the last renter moved out, assuming they vacated in 2018, how did you report this on  your 2018 tax return?

[jberry]

The last renter moved out in 2017.

There was no income from the property in 2018 or 2019, hence we did not report it or complete a schedule E (as we had done all previous years).  Nor did we report/expense the cost of demolition incurred in 2018.

Per previous response, I am curious whether we have to "recapture" the depreciation  and how/where we can deduct the demolition expense ($15K).

Thanks for your time.

[M-MTax · Accepted solution]

There isn't any "recapture".....the building has been demolished and is worth $0.....you can add the costs of demolition to your land basis.

[Carl]

Since the building was demolished, there is no depreciation to recapture. YOu "should" have shown this on your 2018 tax return so as to reduce your cost basis on the property to match the cost basis of the land, since the building was already fully depreciated. This would mean there should be "NOTHING" concerning this property reported on SCH E of your 2019 tax return.

You'll report the sale under the Personal Income tab in the investments section. Under that section elect to start/update Sale of Stocks, Bonds, Mutual Funds, Other. Your cost basis will be the cost of the land plus the cost of the demolition. (Demolition costs gets added to the cost basis of the land). There is "NO" depreciation to recapture. You are selling raw land. Again, your cost basis on this sale is the value of the land plus the cost of demolition.

[jberry]

Carl - thx for your knowledge

Still having problems when testing entries of my 2020 land sale on my 2019 Home&Business TT return. 

Per your response - as well as:

https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-the-sale-of-a-second-home...

I enter info under Investment Income = Stocks,...Other.

I hit update and input institution name and gross proceeds = no problem!

Next - I confirm I did not received a 1099-B    =  I got a 1099-S!

Next - for type of investment sold - I mark Land.

Next - I input requested info - property description, proceeds, date = no problem!

Next - I enter date sold - using a 2019 date instead of 2020

Next - I enter property was acquired by purchase = no problem

Next = problem - "was this investment ever used for rental"???  Well, it was last rented in 2017!  If I  mark yes to "ever rented" and I get booted to Sale of Business Property.  If I mark "personal use only" (assuming "ever rented" might mean ever rented in the tax year!??) - well,  then, I can continue to complete the section an get the long term gain and be done -  BUT - there is no place to enter 1099-S information.

Am I missing something??  Might this require TT Premier instead of Home and Business (which has treated us well for 15 years)?

Thanks for your expertise and time.

[Carl]

I got a 1099-S!

So the only correct response to the question asking if you got a 1099-B, is obviously no. 🙂

Next = problem - "was this investment ever used for rental"??? Well, it was last rented in 2017!

Say no. Since all you're selling is raw land and land is not a depreciated asset, there's no depreciation recapture to deal with here.

there is no place to enter 1099-S information

..and there never will be for this specific sale. All the 1099-S does is confirm to you that the bank has notified the IRS that you received a payout from the sale. That does not always mean the payout is taxable. But it does mean that the payout is reportable no matter what.

Remember now, your cost basis on this sale is the cost you assigned to the land, plus the cost of the demolition, and that's it. The cost of the structure (which is no longer there because you demolished it) doesn't figure into this equation at all.

[jberry]

Once again - thank you.

Hopefully, that will do it!