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Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

We (myself and business partner) acquired a rental single family home on 04/19/2005 for $285,000. 50% ownership each. We put $5k into it immediately. I think that raises our basis to $290,000 (not sure). I'm filing returns only for myself. Sold the property for $315,000 minus a $4,000 credit to seller for closing costs (due to a bad AC unit). Closed on 07/30/2019. Each year that we owned the property I took 1/2 of the depreciation on my tax returns. 50% ownership did not change in any year. We had a lot of selling expenses, which I entered into TT.

 

TurboTax is telling me that I took $30,176 in federal prior depreciation.

It also says I have a gain of $79,140 on my disposition of the rental property and my depreciation for 2019 is $3312. I understand that I have to "re-capture" depreciation, but $80k seems high.

 

TT then reports I have a gain of $47,740 on my disposition of the land.

 

Do these numbers make sense? I don't think the Gain number is correct. I don't think TT is accounting for my 50% ownership.

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1 Best answer

Accepted Solutions
Anonymous
Not applicable

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

your number do not make sense

We (myself and business partner) acquired a rental single family home on 04/19/2005 for $285,000. 50% ownership each. We put $5k into it immediately. I think that raises our basis to $290,000 (not sure). I'm filing returns only for myself. Sold the property for $315,000 minus a $4,000 credit to seller for closing costs (due to a bad AC unit). Closed on 07/30/2019. Each year that we owned the property I took 1/2 of the depreciation on my tax returns. 50% ownership did not change in any year. We had a lot of selling expenses, which I entered into TT.

 

TurboTax is telling me that I took $30,176 in federal prior depreciation (This contradicts the $80k you mentioned below and seems impossible. (with 50% of the building costing $158,000 - this excludes land cost- 2019 depreciation would be $3112.  since it was acquired in 2005, 27.5 year life, it would be over 50% depreciated by 7/30/2019, I get $81872 in depreciation 4/19/2005 through 7/30/2019

It also says I have a gain of $79,140 on my disposition of the rental property and my depreciation for 2019 is $3312. I understand that I have to "re-capture" depreciation, but $80k seems high.

 

TT then reports I have a gain of $47,740 on my disposition of the land.

 

Do these numbers make sense? I don't think the Gain number is correct. I don't think TT is accounting for my 50% ownership.

 

no, the numbers do not make sense but this seems to be due to incorrect entries made by you over the years. 

let's say you bought the property for $290,000 1/2 the cost you should have entered as total cost that would have been $145,000. then you would have needed to enter the 1/2 the cost allocated to land so TT would know the portion of the cost to depreciate. ($158,000 less land cost).  it needed to be entered on the same worksheet as the house.  Sorry that should be $145,000 lest the land cost

 

1/2 of the $315,000 selling price less 1/2 the selling costs needed to be allocated between the land and building based on relative Fair Market Values. 

 

since we can't see your return or forms, you may need to see a pro to straighten out the numbers.   too many things are wrong or inconsistent.   you gain on both the land and building should be $157,500 less 1/2 the selling costs less 1/2 the cost of the land and building plus the depreciation you took (the larger of what you took or what you should have taken) 

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7 Replies

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

How have you been reporting this in the prior years ???    On a Partnership form 1065  ?    Or on your personal returns Sch E for only your portion ?  

 

And did you get a 1099-S for the sale ?   Was the entire sale price on it ?   Or was only your 1/2 ?

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

We didn't sell in prior years.  I've been reporting only my 50% of the property income, expenses and depreciation.

 

Reported on personal returns, Schedule E, yes

 

I received a 1099-S for the sale, and the entire "Gross Proceeds of Sale" (not sales price) was on it, not my 1/2. I am going to ask the Title company to correct this oversight, because basically, they told the IRS that I receive the entire proceeds of sale as only my name was on the 1099-S.

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

Ok ... well now it is making more sense ... if you cannot get the 1099 corrected then you will need to report the entire sale and ADD his half of the sale price in as part of the  COST of sale (strange as that may seem) but it will work. 

Carl
Level 15

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

Don't waste your time with the issuer of the 1099-S. It's not wrong, and they're not going to correct that which is not wrong in the first place. Report the sale "as normal", declaring your partner's half of the proceeds as a sales expense. With your tax return due by July 15th, you *do* *not* have time to play games (that you will lose) with the issuer of the 1099-S.

 

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

Thanks everyone, that helps!

Anonymous
Not applicable

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

your number do not make sense

We (myself and business partner) acquired a rental single family home on 04/19/2005 for $285,000. 50% ownership each. We put $5k into it immediately. I think that raises our basis to $290,000 (not sure). I'm filing returns only for myself. Sold the property for $315,000 minus a $4,000 credit to seller for closing costs (due to a bad AC unit). Closed on 07/30/2019. Each year that we owned the property I took 1/2 of the depreciation on my tax returns. 50% ownership did not change in any year. We had a lot of selling expenses, which I entered into TT.

 

TurboTax is telling me that I took $30,176 in federal prior depreciation (This contradicts the $80k you mentioned below and seems impossible. (with 50% of the building costing $158,000 - this excludes land cost- 2019 depreciation would be $3112.  since it was acquired in 2005, 27.5 year life, it would be over 50% depreciated by 7/30/2019, I get $81872 in depreciation 4/19/2005 through 7/30/2019

It also says I have a gain of $79,140 on my disposition of the rental property and my depreciation for 2019 is $3312. I understand that I have to "re-capture" depreciation, but $80k seems high.

 

TT then reports I have a gain of $47,740 on my disposition of the land.

 

Do these numbers make sense? I don't think the Gain number is correct. I don't think TT is accounting for my 50% ownership.

 

no, the numbers do not make sense but this seems to be due to incorrect entries made by you over the years. 

let's say you bought the property for $290,000 1/2 the cost you should have entered as total cost that would have been $145,000. then you would have needed to enter the 1/2 the cost allocated to land so TT would know the portion of the cost to depreciate. ($158,000 less land cost).  it needed to be entered on the same worksheet as the house.  Sorry that should be $145,000 lest the land cost

 

1/2 of the $315,000 selling price less 1/2 the selling costs needed to be allocated between the land and building based on relative Fair Market Values. 

 

since we can't see your return or forms, you may need to see a pro to straighten out the numbers.   too many things are wrong or inconsistent.   you gain on both the land and building should be $157,500 less 1/2 the selling costs less 1/2 the cost of the land and building plus the depreciation you took (the larger of what you took or what you should have taken) 

Sold rental property, not much appreciation, owned only 50% of it. Is TT over-reporting gains?

You are correct - I misunderstood the 1099-S.  It actually shows 1/2 of the gross sales price, so it is correct and I was wrong.

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