Sale of Rental Property

[cllbrl]

I had sales price of $40,000.00
Original Cost was $22,617 with $5,400 of this allocated to land
Prior depreciation on structure was $17,034
Cost of Improvements was $17,306
Prior depreciation on Improvements was $11,835
Sales expense was $,2400

When viewing the Form 4797 it shows it shows the recapture of depreciation on the structure and improvements,  but what doesn't appear anywhere is the cost of the improvements/assets purchased. It is stating a gain on the sale of $32,400 as it is not adding the cost of the improvements to the cost basis of the structure. It is showing a loss on the land of $555. So it is recapturing the depreciation taken on the structure and improvements without adding the cost of the improvements to the original purchase price of structure? What do I do?

[Carl]

Read and follow the below guidance. YOu *MUST* allocate your sales price of the structure across all property improvements. You will not *EVER* allocate the sales price of the non-depreciated land to any other depreciated asset.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[Anonymous]

TT can't handle multiple asset disposition  (if you have 10 assets and put all the sales proceeds to asset 1) the gain/loss will be reported for only that asset .  so you need to allocate the sales price and sales cost among the assets including land

I would think TT would come up with recapture as follows

net proceeds                                   $37,600

less bldg net value                                      0

less land                                                5,400

gain                                                  $32,200

look at form 4797 page 2 to see what TT is using

not sure how TT came up with loss on land. 

but I can nt see what you have entered.