Struggling with Sale of Property/Depreciation | Your Property Assets

[RayeL]

TurboTax Premier 2024
Need some help understanding how to complete the sale of a stand-alone, single family rental property, not related to my primary residence and that I've NOT lived in 2 of last 5 years. My questions regard how to complete "Sale of Property/Depreciation | Your Property Assets".

There are 4 assets listed: The single family rental home, a kitchen/Bath remodel, a utility shed and a hot water heater. Each has been depreciated from the year it was placed in service. All have residual value (Cost - Prior Depreciation). I assume to click through each to report them as Sold.

First question:

I click "Edit" for each asset and complete screens: "Review Information" | "Did You Stop Using This Asset in 2024?" (YES) | "Disposition Information". Next screen is "Special Handling Required?" It says: "Select Yes if any of these conditions describes your situation. (You'll be able to enter another asset after selecting Yes.)". The last condition is " - This asset was a rental, a home office, or a home office improvement within a home". The Single-Family rental home was indeed a rental, however, if I select "Yes" here it doesn't bring me to the screen where separate entries for Land and Building are entered. So is "NO" the correct answer here?

Second question:

The home itself was sold at less than the '23/'24 Property Tax Assessed Value (Land + Building). Answer NO to "Special Handling Required?" and Turbo Tax asks for separate numbers for Land and asset (improvement): "You must divide, or allocate the sales price and expenses between the land and the asset (improvement) based on their fair market values." Is it correct to use the ratio of latest Property Tax Assessed Values for Land (47%) & Building (53%) to arrive at the allocated sales price for Asset Sales Price / Land Sales Price based on the actual sales price? Or do I use the latest Property Tax Assessed Value for Land and subtract that from the actual sale price to arrive at Asset Sales Price (Business Portion Only)?

Third question:

What is the correct method to arrive at the "Sales Price (Business Portion Only)" for each of the 3 other assets sold with the property? Cost - Prior Depreciation?

Fourth question:

I assume the total of all assets must equal the actual sale price of the entire property. Is this the correct calculation? (Asset Sales Price + Land Sales Price) - (Remodel + Shed + Water Heater)

Thanks to all who reply!

[PatriciaV]

1) You would not check the box for "rental, home office or improvement within a home." This option is for sharing your residence for other purposes. It doesn't apply in your situation.

2) Yes, use the most recent appraisal to calculate the percentage for the land. Then use that percentage for both the sales proceeds and selling expenses.

Example:

1. Total Appraisal: $80,000 for home & improvements; $20,000 for land ($100,000 total)
2. Percentage of Land Basis: $20,000/$100,000 = 20%
3. Total Sales Proceeds (gross sales price) = $150,000
4. Sales Proceeds for Land = 20% x $150,000 = $30,000
5. Sales Proceeds for Home = $150,000 - $30,000 = $120,000
6. Total Selling Expenses = $10,000
7. Selling Expenses for Land = 20% x $10,000 = $2,000
8. Selling Expenses for Home = $10,000 - $2,000 = $8,000

3) Use the above example to allocate the sales proceeds to all the rental assets, based on the asset's adjusted basis (cost less accumulated depreciation) as a percentage of the total adjusted basis of all assets.

4) Yes. When you are finished allocating the sales proceeds, the total for all assets should equal the actual sales proceeds you received.

We recommend that you do these calculations in a spreadsheet before you attempt to enter the information into TurboTax.

[RayeL]

@PatriciaV - Thank you for your responses. Very much appreciated!

1) Understood. As I sold a stand-alone rental property, not a shared part of my main home, the proper answer to "Special Handling Required?" is No.

2) Ok, got it.

3) Since Land is not depreciated, I assume the sum of rental asset adjusted bases is subtracted from the 'Sales Proceeds for Home = $150,000 - $30,000 = $120,000'. Is that correct?

Remodel: Adjusted basis $5000
Water Adjusted basis Heater: $500
Shed: Adjusted basis $1000
Home: Adjusted Proceeds $120,000 - $6500 = $113,500 Asset Sales Price (Business Portion Only)

4) Thanks for confirming.