Sale of rental property-why is the capital gain portion of my sale not showing up on Schedule D?

[sandiipasternak]

I sold my rental property in 2015 of which I have a capital gain on both the sale of the building and on the sale of the land.  I also have recapture of depreciation.  I entered the information on the Schedule E disposition report.  The gain is showing up on line 24-Other Gains or Losses instead of line 13 Capital Gains.  I understand the recapture amount would be an ordinary gain, however, shouldn't the capital gain flow through to Schedule D.  How do I make this happen?

[sandiipasternak]

I checked that it was sold in 2015. The information is showing on the disposition report correctly.  The gain on the land is showing on line 2, Part I of form 4797 and the gain from the sale of the building is showing on line 6, Part I of form 4797.  The gain from the sale of the building includes the capital gain from the sale of the building and the depreciation recapture.  The total of these gains are showing on Line 14 of the Form 1040.  Nothing is showing on Schedule D.

[DianeW]

Holding period comes to mind because short term would not provide capital gain treatment on Schedule D.  Check that to rule it out.  One year or less is short term.

[DianeW]

The other item to check is what is in part III of the 4797 when you review that.

[sandiipasternak]

The holding period is 8 years so that is not the issue.  The Part I gain is all long term capital gain on the land and the part III gain is the combination of long term gain on the building and depreciation recapture.  On Form 4797 in Turbotax the part III gain is combined with the part I gain on lines 7, 12, 17 and 18b.  This gain then flows through to line 14 of the form 1040.  None of the gain flows to the Schedule D.

[sandiipasternak]

Ok, I think I figured it out.  In 2012 I had a loss on a rental property we sold so it looks like this loss is being offset by the gain in 2015 and the full amount of the gain in 2015 is being treated as ordinary income instead of a capital gain.

[DianeW · Accepted solution]

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

When you use the step by step system TurboTax will walk you through it 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:
• Federal Tax tab
• Wages & Income
• Rental Income
• Check that it was sold in 2015 on the situation page
• Step through the screens
• Be sure to mark both boxes of purchased and sold
  
• Follow the prompts and TurboTax will report it correctly