sale of rental house

[wac764]

I sold my rental house. When I go through the forms one of them has the price I sold it for and the second one ask the expenses of sale the third ask sale price of the land and the fourth expense of sale of the land.  

I have two questions   1. Does the expense include the original purchase price ?

                                         2. The property was in the city and the land was not separated from the building, what do I put in the slot?

[DanaB27 · Accepted solution]

No, the sales expenses do not include the original purchase price. The basis is your rental's original purchase price plus settlement costs at time of purchase (abstract, legal and recording fees, surveys, transfer taxes, and owner's title insurance).

For the land you can use the property tax assessor's values from your property tax statement to compute a ratio of the value of the land to the building. If you can't find this then multiply the purchase price by 25% to get a land value.(IRS How do you determine the value of land in rental property?)

Please see I sold my rental property. How do I report that? for additional information.

[Carl]

If you can't figure the ratio with your property tax bill, then use your cost basis to figure the ratio

Example:

Property purchased for $100,000 and $25,000 of that is allocated to the land. That makes the structure cost basis $75,000

During your ownership you put on a new roof at a cost of $10,000 Now your new cost basis is $110,000 with the structure value at $85,000 and the land still at $25,000

You sold the property for $200,000. You need to allocate that sales price between land an structure/other assets.

Doing the math, your $25,000 originally allocated to the land is 23% of your total cost basis. (rounded to nearest whole number)

Then, 23% of your $200,000 sales price is $46,000.

So with that I would report the sales price of the land at $46,000

Then, the remaining $154,000 is allocated to the structure. If more than one depreciable asset, then the remaining $154,000 is split among those assets.