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Sold Rental That Used to be Primary Residence

Hello

 

For the last couple of weeks, I have been searching for questions on how to use Turbo Tax Premiere to report a sale of a rental that used to be a Primary Residence.  But those examples are not still very clear to me so I'm seeking help with the scenario listed below.

 

(a) Cost of Purchase on 7/13/2005 --$275,000  - used as primary residence

(b) Converted to rental in 01/01/2013 - FMV ~ $165,000

(c) Sold rental house on 2/28/2019 for $260,000

          *Expenses for selling the rental house was $30,000 (closing cost, etc....)

(d) Used Turbo Tax to deducted "Land" depreciation of ~$20,000 over the 6 yrs

(e) Any other item(s) that will need to be recaptured?

 

Questions: Do I need to split the selling price when the house was used as a rental and as primary residence?  Do I need to do the same for the cost of the house when it was a rental and as primary residence?  Do I need to enter this transaction under in three different sections of Turbo Tax:  Primary house,  rental property and the business property section?  Thank you for your help.

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2 Best answer

Accepted Solutions

Sold Rental That Used to be Primary Residence

Since the home was NOT your primary residence for 2 out of the last 5 years you will ONLY report the sale as a rental ... follow the instructions in the asset area of the  rental section of the interview ONLY ... do NOT enter it anywhere else.  

View solution in original post

Sold Rental That Used to be Primary Residence


@Carl wrote:

 

You will report this sale in the Investment's section.


Carl, this was a rental when it was sold, so it should be reported in the "Sale of Business Property" section.

 

@ZNewbiesan  Unfortunately, based on the numbers you have given, TurboTax is NOT set up for this scenario and if you follow the screens it will give you the wrong result.  You may consider a good tax professional this year.

View solution in original post

4 Replies

Sold Rental That Used to be Primary Residence

Since the home was NOT your primary residence for 2 out of the last 5 years you will ONLY report the sale as a rental ... follow the instructions in the asset area of the  rental section of the interview ONLY ... do NOT enter it anywhere else.  

Carl
Level 15

Sold Rental That Used to be Primary Residence

@ZNewbiesan 

Stop. You can not report the sale of this rental in the SCH E rental section of the program. That's because the value used for depreciation on the SCH E is less than what you paid for the property. So you will work through the rental section of the program *and* the investments section of the program.

Note that you do "NOT" qualify for the capital gains tax exclusion since this property was *not* your primary residence for 2 out of the last 5 years you owned it, prior to the closing date of the sale.

Elect to edit the rental property. About 3 screens in select the option for "I sold this property" and keep working everything through.

When you get to the "Sale of Assets/Depreciation" section you must work through each individual asset one at a time. As you work each asset though there is information you will need to write down for each asset.  For each individual asset you will indicate that it was "removed for personal use" or "converted to personal use" and your date of removal/conversion will be the closing date of your sale.

As you work through each individual asset one at a time to do the above, you will need to write down the prior year's total depreciation, and the current year (2019) depreciation on each individual asset listed.  When done, add up all depreciation taken on all assets of the property. You will need this total below.

 

You will report this sale in the Investment's section. Elect to start/update Stocks, Bonds, Mutual Funds, Other and work it through. As you work this through you will be asked for total of all depreciation taken on the property. You'll enter the total you figured from the prior paragraph.

 

Now if you need more details (and you may) just ask, making sure to provide me enough information to work with so I can provide the specific detail needed. For the most part, if you just *read* each screen (particularly the small print and the "learn more" links) you shouldn't have any problems here.

Sold Rental That Used to be Primary Residence


@Carl wrote:

 

You will report this sale in the Investment's section.


Carl, this was a rental when it was sold, so it should be reported in the "Sale of Business Property" section.

 

@ZNewbiesan  Unfortunately, based on the numbers you have given, TurboTax is NOT set up for this scenario and if you follow the screens it will give you the wrong result.  You may consider a good tax professional this year.

Sold Rental That Used to be Primary Residence

Really appreciate the feedback.  Yes Turbo Tax seems to drive into another direction when you are following its instruction that may or may not be completely right for my situation.  There was another somewhat similar post that the user had to come up with a different cost basis that would result not be a gain nor a loss.  I was wondering if this would be acceptable practice.  Thank you again.  

 

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/sale-of-rental-proper...

 

@Critter-3 and @ Carl - Thank you for the feedback of the 5 yr gain tax exclusion not able to apply in this situation.

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