Sold Rental Property

[Richbarbhamm]

We sold our rental condo this year.  I have used the Turbotax program for all 16 years we owned the unit.  Each year I update with annual information.  When I go to update the rental section this year, I indicate property was sold.  On the sale of property/depreciation section I edited the asset for the condo itself with sold date (and all other assets).   However, nowhere does it ask me to enter a sales price?  Many years due to our income level we were was not able to take all of the Loss allowed.  It appears the program is taking this into consideration in the property profile.  I want to make sure we have recapture unclaimed losses now that we are selling the condo.

Unfortunately, this event does not seem intuitive to complete on my own.  I would like live support and review, which service should I select to get the support I need.  Thank you, Richard     

[AmeliesUncle]

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@Richbarbhamm wrote:

When I go to update the rental section this year, I indicate property was sold.  On the sale of property/depreciation section I edited the asset for the condo itself with sold date (and all other assets).   However, nowhere does it ask me to enter a sales price?  

Many years due to our income level we were was not able to take all of the Loss allowed.  It appears the program is taking this into consideration in the property profile.  I want to make sure we have recapture unclaimed losses now that we are selling the condo.

When edit the "asset" and you check the box that it was sold, you should eventually get to a "Special Handing" screen.  In most cases, the answer is "No", and then it will ask you for the sales information.  In the event you are checking "Yes", what is the reason for the "Special Handling" that you are saying "yes"?

Yes, when you mark the sold box on the Profile section, that should release any Passive Loss carryovers.  You can check to make sure they are appearing on your Schedule E.

[Richbarbhamm]

Thank you.  This helps.  I was selecting NO on that part of the interview.   IT appears that since our income is over 150k, we do not to get to claim the passive losses.  Does that sound correct to you?

regards, Richard 

[AmeliesUncle]

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@Richbarbhamm wrote:

Thank you.  This helps.  I was selecting NO on that part of the interview. 

 IT appears that since our income is over 150k, we do not to get to claim the passive losses.  Does that sound correct to you?

regards, Richard 

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After you selection "no" special handling, it SHOULD start asking you for the sales information.  Is it not doing that?

No, if you check the sold box in the Profile section, all Passive Losses will be fully usable this year, regardless of income.

[Richbarbhamm]

Yes, when I select "NO" it does allow me to enter sales info. 

What doesn't make sense is that it shows that I made a profit of 61,932.3K.  I bought the property (asset not land for 121k.  The prorate for the sale is 88,750 for land (125k total). 

Schedule E shows passive loss of -29k on line G and Net profit (loss) of -30k (loss) on line I.  Yet line J shows a profit of around 63k.   Is that because I had around 60K in accumulated depreciation?   

Is it possible to pay for a live consult/review prior to filing?

regards, Richard

[MarilynG1]

Yes, click this link for info on What is TurboTax Live?

[Richbarbhamm]

Yes, Thank you.

[Richbarbhamm]

I have a follow-up question.  I purchased the condo unit in 2006.  I was an apartment conversion project and I choose to purchase and remodel vs paying the developer to remodel.   I purchased the unit for 123,000 and investing 18,000 for a remodel prior to renting.   I did originally report the major capital assets individually back in 2006 for depreciation. 

So, now that I sold the unit in 2021, should I report 123k as the cost basis or 141k(123k+18k)

regards, Richard   

[ColeenD3]

You should have two separate assets since you added the improvement individually. You will need to continue to report two assets and prorate a portion of the overall sales price to the improvement.

[Richbarbhamm]

Thank you.  I do not really understand how to prorate.

A little more info.   I have used Turbo tax Premiere since I purchased the Condo.  I originally enter the condo unit as an asset with value of 123k.  I then input the individual assets for the remodel at that time as well (Flooring, Cabinets, bathroom redo's, counters tops, appliances, etc...).  Turbo Tax tracked all the depreciation over the years 60K+/_.  

In March of 2021, I sold the unit to an investor for a Cash out offer (no fees on my part) for 125k.  Are you suggesting that I should reduce the sales price by a prorate of the 18k remodel?  How is the prorate calculated?   

thanks again, Richard

[ColeenD3]

If the original property cost $123,000 and the addition cost $18,000, the total basis is $141k. The addition is 18.8% of the total and the original property is 87.2% of the total.

$125k x 18.8% gives theaddition sales price

$125k x 87.2% of the original asset sale price

[Richbarbhamm]

Thank you for the quick reply. 

Unfortunately, I filed and later questioned my inputs.  I ended up owing @$9500 to the fed - scheduled to be paid next week.   If I amend to the 141k basis and change nothing else, then it looks like I would get about $4500 back.   Sounds like I should amend. 

When is the best time to file the amended return?   

Does this set me up for additional scrutiny and possible audit?  I have all the records of the original remodel and did purchase the audit protection feature. 

regards, Richard 

[PattiF]

This would be a good time to amend the return. The IRS site says that it can take up to 20 weeks to process amended returns.

This will not raise a red flag when you enter legitimate information. Keep your records as you have done.