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dkriegh
New Member

What is included in sales info under asset sale expenditures from sale of rental property?

 
25 Replies
MarilynG1
Expert Alumni

What is included in sales info under asset sale expenditures from sale of rental property?

You may not have any asset sales expenditures when you sell your rental property, unless you sold rental assets separately from the rental property.

 

Click this link for more info on how to enter the Sale of Rental Property.

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catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

I have been depreciating assets such as refinance fees, garage doors, and cabinets. What do we enter for sales price and sales expenses? We need more guidance.

Critter-3
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

Refinance fees .... the balance is deductible in the year of sale ... indicate this in the program.

 

All sold assets ... divide the sales price and cost of sale between all the assets sold based on the % of the total basis.  IE ...

 

House     100   / 160 = 63%

land           30  / 160 = 19%

cabinets    20 / 160  =  13%

doors         10 / 160  =  5%

total         160

 

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

Thank you. However, I am afraid that I need more explanation. I don't know how sales price and cost of sale sold are determined. Could you please elaborate?

Critter-3
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

Really ???   You do not know how much you sold something for and the costs of sale ????   Seek local professional assistance if you cannot read a HUD statement that comes with the 1099-S at the closing table. 

Carl
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

Sales expenses are broken down into two categories.

 - Expenses associated with acquisition or disposition of the loan. Examples would include loan origination fees (sometimes referred to as points) and if the lender required it as a condition of the loan, property survey fees. These expenses are amortized (not capitalized) and deducted (not depreciated) over the life of the loan.

As the buyer, you amortized and deduct these fees over the life of the loan. As the seller, If (and that's a big *if*) you have any of these fees, they are fully deductible in the year of the sale.

 

- Expenses associated with acquisition/disposition of the property. As the seller, it is extremely uncommon for you to have any such fees, as it's usually the buyer that pays these fees. But as the buyer these would include things like the title transfer fee paid at the courthouse to transfer the title from the seller to the buyer. These expenses are added to the cost basis of the property and depreciated over the MACRS life of the property. For rental property that would be 27.5 years.  If the seller pays any of these fees for the buyer, the seller can not deduct them. But the buyer can even though it was the seller that paid these fees.

 

So as the seller you will most likely not have any of the selling expenses mentioned above. But it's not so uncommon that I would say it's "uncommon".  For example, if you sold the property through a realtor you had to pay the realtor a commission. So that commission would be added to your cost basis in the property.

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2019". Select it. After you select the "I sold or otherwise disposed of this property in 2019" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically, when working through an asset you select the option for "I stopped using this asset in 2019" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

Yes, really. Why talk like this to someone who is simply trying to understand?

You clearly don't understand my questions. The windows, refinance costs, and garage doors are not listed as separate assets on the closing statements. 

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

Please note that the previous post was a response to Critter-3.

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

In response to Carl:

I am simply trying to understand what to enter for the sale of assets such as the structure, windows, or garage doors. They have been depreciated for years and are clearly not listed separately on the HUD statement.  So where do the amounts come from that are to be entered when they are sold?

The logic for allocating the sales price across all assets eludes me. Surely the value of the apartment is far more than the separate assets of structure, windows, garage doors, and finance costs. Any light you can shed on this would be appreciated.

Critter-3
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

If the logic for dividing the sales price by simple percentages eludes you then this is a time to get/use a local tax professional and/or upgrade to the LIVE option in the TT system.  I mean this as a positive incentive ... not everyone is a number person so seek help.  

Carl
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

In response to Carl:

I am simply trying to understand what to enter for the sale of assets such as the structure, windows, or garage doors

It is physically impossible to make it any simpler than it has already been made in this text based communications media. So I would highly suggest you seek professional help. This would be especially true if your state also taxes personal income.

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

I appreciate your help. It is quite possible that the problem is that I am making an incorrect assumption somewhere. 

 

Turbotax wants us to enter “sales price” and “sales expenses” for each asset. I have simply been trying to understand what to enter for these amounts when there are not separate prices and expenses for each asset. How is my question unreasonable?

 

Critter-3 says “All sold assets ... divide the sales price and cost of sale between all the assets sold based on the % of the total basis.”

 

I don’t understand how this relates to how we derive sales price and sales expense. Turbotax does not ask for a percentage or total basis in that location.

 

Critter-3 also provides these figures but unfortunately does not explain what the numerators are and how to determine them. Are they the original prices I paid for them? Are they the original cost minus depreciation? Total depreciation? Or something else?

House     100   / 160 = 63%

land           30  / 160 = 19%

cabinets    20 / 160  =  13%

doors         10 / 160  =  5%

total         160

 

What is the relationship between these ratios/percentages and what Turbotax wants? How do they help me determine sales price and sales expense? (If “sales expense” is for all of the costs associated with selling the property, it doesn’t seem like Turbotax would need to ask about this for each asset since all assets are already associated with the property. But maybe I am missing something.)

 

I hope that someone will be willing to answer my questions.

Critter-3
Level 15

What is included in sales info under asset sale expenditures from sale of rental property?

If you have been depreciating these assets as required then this should be a simply third grade math problem ... if you don't understand  this basic example then please seek professional guidance... 

 

Are they the original prices I paid for them? Yes 

Are they the original cost minus depreciation? No 

 

If the sale price is 200 and cost of sale is 10 ....

 

asset       orig basis     % of orig basis      sale price     cost of sale 

House     100   / 160 = 63%           x 200 = 126           x10 = 63

land           30  / 160 = 19%            x 200 = 38             x10 = 19

cabinets    20 / 160  =  13%           x 200 =  26           x 10 = 13

doors         10 / 160  =  5%            x 200 =  10            x 10 = 5

total basis         160

catbill76
Level 1

What is included in sales info under asset sale expenditures from sale of rental property?

Thank you for finally laying this out. Now the internal logic at least makes some sense (although I still don't get the larger logic for what makes this information meaningful, other than that this is the way it is done).

Two things baffle me about how Turbotax treats this. One is that Turbotax already has all of the needed information. It is not clear to me why it asks us to perform calculations that it can do on its own.

The other puzzling thing is that Turbotax makes no effort whatsoever to explain these calculations or to tell us that it expects us to perform them. It is very frustrating for people like me who thought that the whole idea of Turbotax is that we input information and it performs the calculations.

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