1099-S Box 2. Gross Proceeds
Enter the gross proceeds from the sale or exchange of real estate.
Try this with pen and paper.
The formula for calculating your cost basis on rental property is as follows:
* Purchase price
* + Purchase costs (title & escrow fees, real estate agent commissions, etc.)
* + Improvements (replacing the roof, new furnace, etc.)
* + Selling costs (title & escrow fees, real estate agent commissions, etc.)
* - Accumulated depreciation (as reported on your tax forms) [Deprecation taken on building 3 years as a rental]
* = Cost Basis
And then calculating your profit or loss would be:
* Selling price
* - Cost Basis
* = Gain or Loss
Generally ,the real estate contract has provisions specific to real estate transactions and specifies that items affixed to the property (e.g. plumbing, curtain rods, garage doors, etc.) are included (unless specifically excluded) and items not affixed to the property (e.g. floor lamps, drapes, vehicles) are excluded (unless specifically included).
The furnishings are usually transfer by a separate bill of sale.Without a separate contract there is nothing to separate out.
Real estate ownership is conveyed by deed and that personal property ownership is conveyed by Bill of Sale.
Lenders will not allow the value of personal property to be included in mortgage financing; only the value of the real estate.
The 25% depreciation recapture tax rate only applies to the portion of the gain attributable to real property.
To recapture the depreciation take on the 3 years as a rental you need to sell under business property sales to recapture the depreciation.