topic Yes, the sale of real estate previously used as a Rental... in Investors & landlords

How do I report the sale of rental property?

sderbydrop — Fri, 07 Jun 2019 22:43:13 GMT

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?

Sale of Business Property Form

seaescapee1218 — Fri, 07 Jun 2019 22:43:15 GMT

Sale of Business Property Form

what are expenses of sale

demigods87 — Fri, 07 Jun 2019 22:43:16 GMT

what are expenses of sale

Yes, the sale of real estate previously used as a Rental...

PatriciaV — Fri, 07 Jun 2019 22:43:18 GMT

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.

The property was sold at a loss due to a step up after my...

sderbydrop — Fri, 07 Jun 2019 22:43:19 GMT

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>

Unfortunately, there is no tax deduction for this type of...

PatriciaV — Fri, 07 Jun 2019 22:43:21 GMT

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

I have similar situation. Rental property taken off marke...

richard's_tax — Fri, 07 Jun 2019 22:43:23 GMT

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?

The sale of business property generates a capital gain or...

PatriciaV — Fri, 07 Jun 2019 22:43:25 GMT

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).

I already have $3K in capital losses on my return from in...

richard's_tax — Fri, 07 Jun 2019 22:43:26 GMT

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?

Yes, sale of business property is reported on Form 4797,...

PatriciaV — Fri, 07 Jun 2019 22:43:27 GMT

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.

Do I need to separate the non-depreciable land from the h...

richard's_tax — Fri, 07 Jun 2019 22:43:28 GMT

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.

If the land and the building/improvements were sold in on...

PatriciaV — Fri, 07 Jun 2019 22:43:30 GMT

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.

If I reported the sale of my rental property under Sale o...

taxnerd566 — Fri, 07 Jun 2019 22:43:30 GMT

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?

Yes. Checking that box should remove the property from yo...

PatriciaV — Fri, 07 Jun 2019 22:43:32 GMT

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

should I then keep the information in sale of property si...

taxnerd566 — Fri, 07 Jun 2019 22:43:34 GMT

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?

Re: should I then keep the information in sale of property si...

omarhass — Sun, 03 Sep 2023 01:47:38 GMT

Hi,

I have a follow-up question about how to report the sale price of the rental property that was rented only for a fraction of the time that I owned it. For example, it was rented for about 78% of the time that I owned it. The rest of the time my kids lived in it.

So should the reported sale price be multiplied by 78%(.78)?

Thank you

Re: should I then keep the information in sale of property si...

Hal_Al — Mon, 04 Sep 2023 14:55:14 GMT

@omarhass said "I have a follow-up question about how to report the sale price of the rental property that was rented only for a fraction of the time that I owned it. For example, it was rented for about 78% of the time that I owned it. The rest of the time my kids lived in it."

Q. So should the reported sale price be multiplied by 78%(.78)?

A. No. The entire (100%) capital gain is taxable. You have a 2nd home (your relatives used it after being a rental). The sale of a 2nd home (personal use property) is taxed as a capital gain at the same tax rate as the sale of rental property. Unlike the sale of your primary home, there is no special tax treatment for the sale of a 2nd home. In addition, you need to recapture the depreciation claimed (or allowed) during the rental period.

You need to enter it as the sale of "business property".

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)

- Wages & Income

Scroll down to:

- Business Items

- Sale of Business Property

Re: How do I report the sale of rental property?

Anonymous_ — Mon, 04 Sep 2023 18:22:31 GMT

@andryvotty wrote:
If you sold the rental property for $500,000 or more, you will need to report the sale on Form 1099-S.

There is no magic number here with respect to the sale of investment or rental real estate. Further, the party responsible for closing the transaction is also responsible for filing the 1099-S (and that's usually not the transferor).

See https://www.irs.gov/instructions/i1099s#en_US_202201_publink1000280429

@andryvotty wrote:
If you sold the rental property for less than $500,000, you will need to complete Form 8949 and Schedule D to report the sale. Form 8949 is used to report the sale of capital assets, such as rental property...

Again, there is no magic number, but the sale of rental property (subject to depreciation recapture) is reported on Form 4797; real estate held for rental purposes is essentially business property.

@andryvotty wrote:
If you have taken depreciation on the rental property over the years, you may be subject to depreciation recapture when you sell the property.

With respect to rental real estate, the owner is subject to depreciation recapture whether or not depreciation deductions have been taken over the years (recapture is based on depreciation deductions "allowed or allowable").

Re: How do I report the sale of rental property?

omarhass — Mon, 25 Sep 2023 13:09:36 GMT

Thank you for the helpful replies, appreciated.

So how come the turbotax software has this field that's asking about how long or the percentage the rental property was used for business?

If I keep the field empty the Turbotax software, the tax portion I owe is much higher than when it's filled in with 78%.

Please clarify the significance of this field and why it's affecting the amount of tax owed for the property sale.

Regards,

-Omar

Re: How do I report the sale of rental property?

Anonymous_ — Mon, 25 Sep 2023 13:28:08 GMT

You mentioned earlier that your "kids lived in it [the property]", which clearly constitutes personal use.

Did they use the property before, during, or after the rental use?