We sold our rental property in 2016 for a net profit of $3K, and lost money every year while rented. It was rented for a little over 3 years. Where do i enter the sale?

[jana-raber]

Purchased in 2003 for $269K, rented 2/13, sold 4/16 for $260K. Sales expenses were $20,296. After mortgages were paid off the net profit was $3K. Do I use the "Sale of Business or Rental Property" form under Income - Business Items.  Or do I use "Sale Information" under Rental Properties and Royalties.  Guidance on which form to use and what to enter? I don't have a 1099S -I have the final closing disclosure.

[DianeW · Accepted solution]

Use the sale under the rental activity. In 2016, you used this property 100% of the time for business before the sale,  TurboTax will then handle the depreciation based on the sales date, and carry the gain to the appropriate place, taxed at the appropriate rate.  The steps below will take you through the property sold.

If there is gain that is more than the amount of depreciation previously used there should be some capital gain treatment maxed at 25%.  It goes from the Form 4797 to the Schedule D and the land would follow this path as well.

TurboTax will walk you through the sale and report it correctly.  For this reason I will provide the steps to follow to make sure the entry is completed correctly.  

• In TurboTax Premier desktop or online:
  
• Federal Taxes tab
• Wages & Income
• Rental Income
• Check that it was sold in 2016 on the situation page 
• Step through the screens - 
• answer yes it was rented all year, then no to you didn't own it all year  for the property sold)
• Enter the number of days it was rented before sale
• Follow the prompts to complete your entry
  
• View the screenshots attached for assistance by clicking on each one

[jana-raber]

Although this helped a bit, the part I was questioning was when you go to enter the actual $ amounts on the "Asset Summary", and click "Edit" on the property, TurboTax says if the business-use percentage varied over the life of this asset (which it did going from primary residence to a rental), then it says to enter the sale information in the “Business Income/Sale of Business Property” and indicate this is "Special Handling".  I followed all of your screens above to make sure that was entered correctly, then entered the sale information in the "Business Income/Sale of Business Property" for the 3 years it was considered a "Business Property", and then entered the remaining 10 years under "other investment or personal use property".

[DianeW]

This should provide the correct capital gain treatment to each portion of gain as long as you used the accumulated depreciation from the rental activity for the entire rental period to reduce the basis and you prorated the purchase and sales price for the property.

[jana-raber]

Thank you TurboTaxDianeW for clarifying!

[DianeW]

You're Welcome.