I sold rental property last year, what numbers should I fill in for the asset sales price and land sales price?

[allison]

I sold my rental property last year.  It was bought in 2011 for $170,000, then rented out until mid 2018, sold in 2018 for $275,000.  No improvement, the fair market value of the land was $30,000.  Now I sold the property, what should be filled in for the following few items in TurboTax:

Wages & Income -> Rental Properties & Royalties ….-> Sold

Sales Information

Enter the following information about the sale of this asset.  You must divide, or allocate the sales price and expenses between the land and the asset (improvement) based on their fair market values.

Asset Sales Price (Business Portion Only) _________

Asset Sales Expenses (Business Portion Only) ________

Land Sales Price (Business Portion Only) ___________

Land Sales Expenses (Business Portion Only)___________

Question 1: How to calculate the Land Sales Price (business Portion Only)?  The property was used 100% for rental.  

Question 2: What number should be for the asset sales price? Is it $275,000 plus closing costs?  Is not it that the asset sales price include the land price already?  If I put non-zero land sales price (for example, 30,000), my tax goes up immediately, so this land sales price seems add to the gain of selling this rental property, something wrong in my understanding.  

Question 2:  Is the Asset sales price $275,000 in my case?

[Coleen3]

Your asset sales price is $275k. If there are closing costs, add them to the basis. You will have to estimate as best you can the land price. If land prices have not changed since 2011, use the same percentage that you used when your first started renting. If out of the $170 purchase, 20 % was allocated to land, do the same for the sale.

[allison]

Thank you very much for taking time answering my question, Turbo Tax Coleen.  This is very helpful.  I follow your answer in input to Turbo Tax, then go to Form 4797 p2 to review the number;  the total gain in Line 24 has 30K more than my hand calculation.  To make the discussion simple, lets assume the accumulated depreciation of the rental property over these years is 35K and I have 20K in sale closing cost and improvement.
By hand calculation
Form 4797: Line 20  Gross sales price (Note:  See line 1 before completing.)  :  275,000
                      Line 21 Cost or other basis plus expense of sale: 190,000 (i.e., 170K+20k)
                      Line 22 Depreciation (or depletion) allowed or allowable:  35,000
                      Line 23 Adjusted basis. Subtract line 22 from line 21.  155,000
                      Line 24  Total gain. Subtract line 23 from line 20 .  120,000
However, in Turbo Tax, after I put 30,000 for the cost of land, in Form 4797,
                       Line 20  Gross sales price (Note:  See line 1 before completing.)  :  275,000
                      Line 21 Cost or other basis plus expense of sale: 160,000 (seems to me: 170K+20k-30k)
                      Line 22 Depreciation (or depletion) allowed or allowable:  35,000
                      Line 23 Adjusted basis. Subtract line 22 from line 21.  125,000
                      Line 24  Total gain. Subtract line 23 from line 20 .  150,000

The total gain from Turbo Tax and from my hand calculation as 30K difference, that is the cost of the land. Is it anything wrong in Turbo Tax calculation or my hand calculation or some where?

[Coleen3]

You will have to break up the sale into two parts. Subtract out the land as property that can't be depreciated and enter it separately under the next section, Sales of Other Business Property. You will subtract it from both cost and sales price. Allocate the sales expenses between the two separate entries. The land is entered in Part I, the building in Part III

[allison]

Thank you very much, Turbo Tax Coleen, for following up on my question. I think I got it this time.  I was confused by the asset sales price and the cost.  In "Tell us about this rental asset" page,  it asks
"Cost:  The amount you paid for it, plus freight, installation, sales tax, legal fees".  I should enter the total cost I paid for the building plus the land plus rest of the fee mentioned about, and the cost of land is straight forward in understanding it.  Coming to the page of "Sales Information", it asks "Asset Sales Price", I should do as you wrote above,break up the sales price into two parts, one for the building, one for the land, even though there was not statement on how much for each one in sales paperwork.  Of course,  the closing cost etc should be divided accordingly.  Turbo Tax is not consistent in asking purchase and sale information, that is, when coming to the "Tell us about this rental asset", the "cost" means the purchase price for the building and the land together, plus expense and fees, but coming to the "Sales information", it asks for asset sales price, and it means differently.  I would like to suggest to Turbo tax to change the way of asking the rental sale or cost information, make them to be consistent.  That confusing results in a wrong and higher capital gain to pay.  Thank you very much Turbo Tax Coleen for helping out.

[Bees]

You didn't mention taking depreciation on the property. You are assumed to have taken depreciation on the asset except land values and will be taxed on the amount at a higher rate for that gain.

[allison]

Yes, I did take the depreciation each year and will recapture it and add to the total gain.  I follow Turbo Tax well on that part and the tax calculation.  Thank you very much for reminding me.  

[kvger619]

Allison,

So what numbers did you put in the Asset Sales and Land Sales based on what they told you?

[Betty Tau]

I am having the same challenge...figuring out where to add the closing expenses for the purchase. Closing expenses for the sale is transparent, but I am searching for where to find fields for closing expenses on purchase.

[Cooking123]

• Sale price 447500 
• sale expenses 11429
• land cost 42800