topic Where do I enter the 2020 sale of a second home that was rented as a vacation home in 2003-2004? in Investors & landlords

Where do I enter the 2020 sale of a second home that was rented as a vacation home in 2003-2004?

CFB54 — Thu, 25 Feb 2021 21:22:27 GMT

We sold our second home in 2020 for a net gain. We built the home in 2003, and in 2003 - 2004 the house was briefly in a vacation rental program, therefore having some depreciation taken (separate amounts for contents and the building). Since then it has only been used for personal use, not for business. I am unclear whether I need to enter the sale under investment income - in which case I don't know how to recapture the depreciation, or under the Sale of Business Property. Also, I assume we only need to recapture the depreciation on the building and not on the contents. I am using TurboTax Premier. Any advice would be much appreciated!

Re: Where do I enter the 2020 sale of a second home that was rented as a vacation home in 2003-2004?

ColeenD3 — Sat, 27 Feb 2021 17:43:34 GMT

It is properly the sale of investment property. You will have to manually adjust the depreciation and subtract it from the basis. Keep good records of how you came up with the basis.

Re: Where do I enter the 2020 sale of a second home that was rented as a vacation home in 2003-2004?

CFB54 — Thu, 04 Mar 2021 19:29:44 GMT

Thank you for your response, ColeenD3. Is simply subtracting the depreciation from the basis sufficient, or do I need to enter the depreciation somewhere else to recapture it? The only way I can figure to do it is to figure the percentage of the sale etc that relates to the rental period (3% of the time we owned the house), enter that as a sale of business property and recapture the depreciation in that transaction. Then the rest of the sale etc will be entered as the sale of investment property. Am I making this harder than it should be?

Re: Where do I enter the 2020 sale of a second home that was rented as a vacation home in 2003-2004?

ReneeM7122 — Fri, 05 Mar 2021 17:13:04 GMT

Depreciation recapture is assessed when the sale price of an asset exceeds the tax basis or adjusted cost basis. The difference between these figures is thus "recaptured" by reporting it as ordinary income. Depreciation recapture is reported on Internal Revenue Service (IRS) Form 4797.

To account for the recapture, you should incorporate Form 4797, sale of business property to your return.

To add Form 4797:

Search for 4797, sale of business property and click the Jump to link.
On the Any Other Property Sales? screen, select the first checkbox and click Continue.
Follow the instructions to complete the form.

@CFB54