How do I report the sale of rental property?

[sderbydrop]

Sold what has been used as a rental property in 2016.  It was not rented out in 2016 but had been for 14 years prior.  It won't let me use it as sale of rental where I can add expenses and depreciation - which has been taken in prior years.  If I put it in the sale of investment then it shows as a loss but given the depreciation taken it probably isn't correct.  Any thoughts?

[seaescapee1218]

Sale of Business Property Form

[demigods87]

what are expenses of sale

[PatriciaV]

Yes, the sale of real estate previously used as a Rental Property is reported as the Sale of Business Property. You will need to know the amount of depreciation that was taken during the period you reported this as a rental property. (TurboTax will not calculate this for you.)

The easiest way to find this section of TurboTax is to use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in "sale of business property", hit Enter, and click on "jump to sale of business property" to go directly to beginning of this topic.

Or go to My Account >> Tools >> Topic Search. Type in "sale of business property", then click the topic in the list to go directly to the start of this section.

At the start of this section, choose "Sales of business or rental property that you haven't already reported" (see screenshot below - click to enlarge). Then follow the prompts to enter the sale, basis, and other info for your property. Note that you cannot report a loss on this type of sale.

[sderbydrop]

The property was sold at a loss due to a step up after my husband died in 2008.  Not sure if I should even consider it in the return>

[PatriciaV]

Unfortunately, there is no tax deduction for this type of loss. In this case, the transaction is not included on your return.

[richard's_tax]

I have similar situation. Rental property taken off market in 2015 to renovate for sale.  Rental interview deletes property because no attempt to rent in 2016.  When I do the sale of Business Property interview it generates a loss and plugs it on 1040 line 14 and deducts from AGI?  I was expecting a passive real estate loss, but no impact on this year's return.  The IRS is getting a 1099S on this sale so I don't see how it shouldn't be included in some way on return?

[PatriciaV]

The sale of business property generates a capital gain or loss. Even if you sold an active rental, the result would be a capital transaction (not passive rental activity).

[richard's_tax]

I already have $3K in capital losses on my return from investments on line 13.  My losses on this transaction are more than $3K and this larger number gets plugged into line 14.   I have no capital gains for the year so I'm surprised to see this transition reduce my income by more than $3K.  Why wouldn't  this show up as a carry forward capital loss?

[PatriciaV]

Yes, sale of business property is reported on Form 4797, which appears on Line 14. This type of loss is not subject to limitations or carryovers.

[richard's_tax]

Do I need to separate the non-depreciable land from the house when reporting this transaction?  Ttax  doesn't seem to want to treat it that way.

[PatriciaV]

If the land and the building/improvements were sold in one transaction, you would report this as one sale. If you run the calculations, the gain/loss is the same whether you allocate or not.

[taxnerd566]

If I reported the sale of my rental property under Sale of Business, do I still mark (I sold or disposed of this property) in the rental summary?

[PatriciaV]

Yes. Checking that box should remove the property from your return next year.

[taxnerd566]

should I then keep the information in sale of property since it allowed me to input the information such as original sales price? under rental property it wont ask me for original sale price. Also, under depreciation, should I go back and figure out the depreciation for only the yrs it was under rent, or for all the yrs I owned the property?