Sold a rental house on Oct 1. Stopped advertising for rent July 31. Did repairs for renting and additional work for selling. Where do I put the cost of work for selling?

[jmgadget]

I sold a rental house on October 1st.  It was rented consistently for previous 6 or 7 years and was rented from Jan 1st through June 30th of 2017. I did $1000 in misc repairs after the renters moved out and I tried to rent it during this time. I removed the rental listing ad on July 31st and decided to do more cosmetic improvements ($5000) before either renting again or putting it on the market for sale. On Sept 1st I listed it for sale. It sold within a few days and I closed on Oct 1st.

I have read several comments saying after you stop trying to rent that it becomes personal property and you need to split expenses (based on date of expense) between rental period vs personal period. I know how to allocate the repairs and improvements for the rental period as I have done this for years in turbo tax for several properties. I've read several instructions on how to follow the steps in turbo tax for a sale of rental property but I get confused when trying to separate the personal period costs.  

Also, when did my rental period stop and personal period begin? Was it July 31st (removed rental listing) or Sept 1st (listed for Sale) or do I consider the entire period up to closing as a rental?  I did get an offer within a day of listing it but it was a little low. I told my realtor if we could not sell it for closer to asking I would just keep it and continue as a rental. I doubt this has any influence on the end of the rental period but included the comment in case it did.

I thought everything (including repairs and improvements) done during the personal period would go toward Selling Expense, along with Sales Commissions, Doc Prep, etc from Hud form. But I remember reading that you can't include things like utilities, yard work, property taxes as selling expense. So where would those items go? 

Also I purchased carpet and appliances for the sale.  I don't think I would depreciate them since I only held for approx 60 days. Do they just get included with the repairs?

Here are the types of expenses that I had preparing for the sale (or potential re-rent).

Yard mowing, utilities, counter tops, light fixtures, fire & casualty insurance, locks, carpet and vinyl flooring, paint, water heater, appliances. Also, what about depreciation on the house after the rental period ends?  

Thanks in advance for any help or advice.  

I am running out of time and don't want to file an extension.

[Carl]

Forget about converting the property to personal use. If you did not live in the property for one single day as your primary residence, after the last renter moved out, then it remains classified as rental property for the entire time you owned it in 2017. Wihile you could convert it, you are not required to in your specific case. Converting it to personal use before you report the sale, just creates additional and unnecessary paperwork for you, that will result in the same end game. No need to "go around your elbow to get to your thumb" here. You have no "personal use" in 2017, therefore you have nothing what-so-ever to split between personal use and rental use. Report the sale of the property in the Rental & Royalty Income (SCH E) section of the program and be done with it.

"Also, when did my rental period stop and personal period begin?"

The rental period never stopped, and no personal use period ever started in 2017, because you did not live in the house *as your primary residence or 2nd home* for one single day after the last renter moved out.

"I thought everything (including repairs and improvements) done during the personal period would go toward Selling Expense, "

We all think wrong on occasion, and I certainly have no halo over my head in that respect. First, you have no "personal period" of use. Your repairs are added to the cost-basis of the property. As for your property improvements (I assume you know the difference between a repair and a property improvement) those get entered in the assets/depreciation section and for those property improvements done after the last renter moved out, you just indicate that specific property improvement/asset had 0% (zero percent) business use. That way, it's not depreciated since it was never utilized by a tenant.

"Also I purchased carpet and appliances for the sale.  I don't think I would depreciate them since I only held for approx 60 days. Do they just get included with the repairs?"

No, they are not repairs, any way you look at it. They are property improvements, without question. You still list them in the assets/depreciation section, making sure you indicate zero percent business use so they are not depreciated.

 Yard mowing - Rental expense, claimed in the cleaning & maintenance box.

, utilities - Rental expense, claimed in the utilities expense box.

, counter tops, light fixtures - Property improvements. You do not have to list them all separately. Just include the cost with a high cost property improvement (such as the appliances and carpet) and that will make your life easier (trust me! it will!) when you are reporting the sale in the Rental & Royalty Income (SCH E) section of the program.

, fire & casualty insurance - Rental expense. You already know where to enter that.

locks, carpet and vinyl flooring, paint, water heater, appliances - Just group all this small stuff together calling the asset something like "property updates & upgrades" and leave it at that.

"what about depreciation on the house after the rental period ends?"

Moot point, since the property remains classified as residential rental real estate property through the date of the closing on the sale.

"

[jmgadget]

Carl, Thank you for taking the time to give me such a detailed and direct response.  I had hoped that if I included the extra details, my situation would be understood properly and the response would apply.  You have exceeded that hope! Much appreciated!

[Carl]

The extra details definintely helped. But do be careful about "writing a book". My particular area of interest and expertise on the tax front, is rentals. When I first saw your post and the length of it, I just "knew" it was a life story with a bunch of unnecessary history and things that have nothing to do with taxes. The only reason I started reading it is because I was in one of my "entertain me" moods. Surprised that the only thing present was pertinent details, and it was better organized than most lengthy post are. So that made it easy to break it down and respond with what I hoped would be useful information. Just goes to show how true the statement is, "The quality of the answer is directly proportional to the clarity of the question."

[jmgadget]

I ran into a small problem when adding the three new assets to depreciation section. I cant elect to use 0% business use. Only allows 1% or greater.

-Under "Tell me more about this rental Asset" section
       -The first set of questions asks if:
             1. I traded in an old asset to acquire this one
             2. I purchased this asset new (I checked this one)
             3. The item was sold, retired ,stole, or is no longer being used in this business ( if this is checked it asked for the date sold or retired)
             4. None of the above.

       -The second section of page asked if used this item 100% for this business since acquiring it?
              -Yes
              -No
                       -I used this for personal purposes before starting it in this business
                       -I first used this item at least part of time in this business and also for personal
             If I check NO - then it asked for date I started using it in business and the percentage used in business in 2017.  I put in "0" and it says it must be greater than or equal to 1%.  
           Should I just use 1% or is there another option above I should use so it is not depreciated?


Also - I read where I should allocate a percentage of the Rental Structure Sales Price to each asset that was part of the sale (my old depreciated improvements as well as new ones added in 2017) even if only $1.

 I assume you agree with this process? Since you made the comment about grouping smaller improvements into the larger ones to make life easier when reporting the sale in Rent & Royalty Income (Sch E).

  THANKS!

[jmgadget]

Well I see that I got wound up with the % used for business thinking I needed to check "No" so I could enter "0%". I went ahead and checked "Yes" used for 100% business and it allowed me to move on to next screen. I entered asset $ info and allocated sales price between all assets. When finished it only listed depreciation for the house and the other 2017 asset items showed $0 depreciation just as you suggested.

[Carl]

I 'think" you can select .1 or .01 for business use on those assets. But so long as there's 0% depreciation in 2017 for those assets not placed in service in 2017, you'll be fine.

[sonira]

in late 2018, I purchase a property for rental and claimed it as such in 2018 taxes. I made a lot of needed improvements.  Once the improvements were completed, I decided to sell the property instead of renting it.  Can I still claim this property as a business? I did not live in it, but I had zero days of rental income.

Do I claim all my expenses (improvements, closing cost, insurance, property tax, utilities, etc) as part of the Asset Sales Expense? if not, how should I report it.

Thank you