Turbotax says I have a $141k gain on my rental property sale even though I sold it at a huge loss

[nash123456]

Hello all,

I am using Turbotax online. Bought a condo in 2002 for $200k, lived in it until 2007 and rented it out starting 2007. Many bad renters later, sold it in 2024 for $167.5k. I reported the rental income etc every year in Turbotax, and it calculated depreciation every year. However, when I entered my sale price and sale date in the Rental section, it created a Sale of Business Property section, and it is saying I made a gain of $141k! What am I doing wrong?  

[VolvoGirl]

It's probably right.  You have to recapture the depreciation and it is taxable.  Someone else will know more about  that.  

[nash123456]

Thanks for responding- am I reading the TurboTax page wrong?  To me, a capital gain of $141k on a loss sale at $167.5k is out of whack. TurboTax used to show the tax owed in the progress ruler in the past, now it doesn’t show it, so I can’t see if I owe a gigantic tax because of this $141k gain. 

EDIT: It shows $15k of taxes which is a lot more than I am expecting (I should be getting a refund) so I am guessing the $141k is blowing up the calculations. 

[Mike9241]

something does seem out of whack

sales price  167

selling expenses (7?)

net 160

less basis 19 (plug to equal gain reported by Turbotax)

gain 141

cost 200

depreciation 181 (to equal the above basis

basis as above 19

the 181 seems excessive but since we have no access to your return we have no idea what you are doing wrong

however, one possibility is that if you assigned some of the $200 to land you must assign some of the sales proceeds and selling expenses to the land otherwise the cost assigned to the land is ignored resulting in an artificially high gain.  

[nash123456]

Thank you. So here are the entries that Turbotax brought in from 2023 return:

Cost $200,000

Land: 11867

Business 25% (is this right? Should this have been 100%?)

Prior Depreciation: 27719

Here is what I had entered the Sale Info as

Asset Sale Price: $167,500

Asset Sale Expense: $4600

Land Sale Price: $0

Land Sale Expense: $0

I see your point about entering Land Sale Prices. The original entry for Land is approx 6% of the cost, so I can prorate for 6% in the sale prices (hope that's the right way to do it) but when I enter approximate amounts, the gain drops to $134k, which is still high.  

Should I enter 100% on the Business percentage onthe first screen? I do not know why it came in at 25% and now I am doubting if this could have affected the rental calculations all along. 

Thanks. 

[Mike9241]

still don't know what you are doing wrong but based on the numbers you provided

167500 less selling expenses of 4600 is a net of 162900

200000 less depreciation of 27719 is net basis of 172281 (ignoring 2024 depreciation)

thus there should be a loss 

however, why 25% depreciation? if from 2007-2024 it was only a rental and not also your personal living space depreciation should have been at 100%. The tax laws require you to recapture the depreciation you should have taken even if you never took it. The correction requires filing form 3115 which should be left to a pro.  if this was rented to family or friends at below market value it raises another issue. these are issues that can't be resolved in this forum. see a tax pro. 

[nash123456]

Thank you - I will check prior year returns. It was never rented to family members under air market price. Thanks.  

[KrisD15]

Please check to see how you entered the rental. What did you enter as the value of the condo and value of the land in 2007.?

Did you add any other assets?

Did you try to take any Bonus or Special depreciation or Section 179 Deduction in the past?