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.
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.
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
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?
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.
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.
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.
Please note that the previous post was a response to Critter-3.
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.
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.
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.
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.
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
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.
Yes it is the way it is done ... and a DIY program cannot explain all the details in the tax code or you would be completing a return for months ... that is why professionals are useful for more complicated returns like yours.
And the program has only part of the information ... you must enter the sale price and cost of sale for each asset yourself ... the program cannot do it for you.
You know I went and looked ... the program DOES explain things if you click on the blue letters ... it tells you exactly what you need to do ... FYI ... even the professional programs require the user to do the math before you can enter the amounts in the program ... remember if you are the preparer it is your responsibility to educate yourself in any way needed to complete a correct and accurate return.
What version? I am using the Premier version and it does NOT say anything about allocation.
Nor does my version say anything about land.
I could do without the suggestions that this is too complicated for me. I am not an idiot and I know many people who own rental property. This is not an uncommon situation.
To make these calculations only requires information that TurboTax already has. The whole point of TurboTax is supposed to be that it performs the calculations, not us.
@catbill76 wrote:To make these calculations only requires information that TurboTax already has. The whole point of TurboTax is supposed to be that it performs the calculations, not us.
Yep. Makes you wonder why you are using TurboTax, doesn't it?
As far as being complicated, some things can get complicated because the program is severely lacking and does not do many things (and has errors in other things). Because you would need to manually do certain calculations, it is often best to go to a tax professional in those situations.
You need to upgrade for one on one help ... this forum is not the right way to get help for a subject you are struggling with.
The only reason I have been struggling is because TurboTax gives so little help on what it is looking for. You accuse me of being ignorant and dumb when I have shown you that your version gives more information than mine. How in the world am I supposed to know about allocation when the Turbotax I am using does not mention it?
My questions are not particularly complicated and once I saw the fuller example you finally provided, some of this makes more sense. I was hoping for friendly help here, not continual assertions that it must be too difficult for me.
That said, you are trying to help and I appreciate that. Just keep in mind that we may be working with different assumptions, information, and versions.
I posted from the same version that you are using ... either you are in the wrong place in the program or you are not continuing thru to the correct place and I cannot help you any further in this forum ... you need assistance in some manner ... for free you can talk to TT support or for a fee you can get professional guidance your choice ...
Contact Customer Service
5am-5pm Pacific Time Monday -Friday
https://support.turbotax.intuit.com/contact/
Sorry to hear that you think I did something wrong. You know nothing about my situation or how I ended up at that location. You cannot possibly know whether or not I am in the right place.
In any event, that location exists. It provides no information about allocation. It is immaterial how I arrived at it.
When I worked as a tax expert for TT I could have taken you by the hand and showed you exactly where you need to be and what you need to do in a few minutes ... but in this forum I cannot assist you any further. PLEASE seek assistance in some other way so you can stop this frustration.