TT adding sale of primary home (after renting it for 16 months) of the to "Net California Adjustments"

[dschulze01]

I owned a home in Nevada for 25 years. The last 16 months of ownership, I was living in California and renting this Nevada home to my tenant. I sold the home in 2019. I am eligible for the "exclusion of gain" both federal and California, as I lived in the home for more than 2 of the last five years. When I check the box "The item was sold, retired, destroyed ....." and enter the "Date you Sold" in the "Rental Asset" section of "Your Property Assets" section, TT adds the net gain of the sale to "Net California Adjustments" line, and increases my “California Taxable Income” by that amount. TT also increases the "Federal Adjusted Gross Income" by the "2019 Estimated Expense for this asset”. The net gain of the sale of this house should not be added to my “California Taxable Income”.

Two questions:

1. What am I missing? 
2. Why is the “2019 Estimated Expense for this asset” also being added to the "Federal Adjusted Gross Income”?

Thank-you.

[ColeenD3]

Here are some points to check.

• On the, "Tell Us More About This Rental Asset" screen, you checked the box that said it was not always used for business and then clicked, "I used this business for personal purposes...

After a few more screens, you will encounter, "Home Sale", "Was this asset included in the sale of your main home"

[dschulze01]

Coleen, Thank-you for responding.

In reference to you instructions, I did select "No, I have not always used this item 100% of the time for this business." Then I did select "I used this item for personal purposes ..."

Screenshots attached ....

Any other ideas?

Dan

[ColeenD3]

Did you indicate that a Sale of Main Home was applicable?

[dschulze01]

Hi Coleen,

Thank-you for getting back to me again.

Yes, I indicated that the asset was included in the sale of my main home.

The odd thing is that as soon as I:

1. Checked the box "The item was sold, retired, destroyed ....."
2. Entered the "Date you Sold" in the "Rental Asset" section of "Your Property Assets" section
3. And clicked "Continue"
4. TT adds the net gain of the sale to "Net California Adjustments" line
5. And increases my “California Taxable Income” by that amount
6. TT also increases the "Federal Adjusted Gross Income" by the "2019 Estimated Expense for this asset”.

1. If I uncheck the box "The item was sold, retired, destroyed ....."
2. Click continue
3. The net gain of the sale to "Net California Adjustments" line is removed
4. TT Decreases the "Federal Adjusted Gross Income" by the "2019 Estimated Expense for this asset”

• At this point I haven't even gotten to the "Was this asset included in the sale of your main home" question.

I'm baffled, as I have gone back and looked and relooked at all the questions and tried different things, but it always keeps coming back to the scenario I described above.

To be honest, seems like a glitch/coding problem ... but what do I know! 🙂

Dan

[dschulze01]

Coleen,

I just want to let you know the latest update to TT has fixed the big problem of "adding the net gain of the sale of my rental property to the "Net California Adjustments" line.

However I had another question related to that:

• Why does the "2019 Estimated Expense for this asset” get added to the "Federal Adjusted Gross Income" line when I mark the property as sold?

Thank-you,

Dan Schulze

[ColeenD3]

Please see if this LINK is any help. Ignore the part about Timothy and postponing gain.

[dschulze01]

Thanks Coleen,

I read through that post from the link you supplied. My question actually had to do with the depreciation of a rental property. Upon further investigation, I found that the "2019 Estimated Expense for this asset” appears to have something to do with the depreciation. I have attached a screenshot. This $3,638.00 amount "2019 Estimated Expense for this asset” gets added to the "Federal Adjusted Gross Income" line when I mark the property as sold. I would assume that the depreciation obviously is not deductible when selling the property, which makes sense.

Thank-you again for your time.

Dan

[NCperson]

isn't there depreciation recapture, which gets taxed at 25%? that is probably what is occurring.