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How do i enter sale of property where the business use percentage varied over the life of the asset (the program cannot automatically compute the sale information)?

Also, do I need to dispose of all depreciated items associated with sale and how do i factor the sale price for those items?
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1 Reply
DianeW777
Employee Tax Expert

How do i enter sale of property where the business use percentage varied over the life of the asset (the program cannot automatically compute the sale information)?

Yes, you do need to dispose of all depreciated items associated with your sale.  Here is an example for a of how to arrive at the selling price and selling expenses.  This example is for a rental house. Knowing the asset would be helpful.  The formula works for both business and personal portions however you must figure out the average business use percentage.   

 

Because the business use percentage varied, you should indicate the property was converted to personal use which will close out each asset in the business section.  Then you can enter a business sale. And if you have a profit/gain on the personal portion you would enter that under investments.  A personal loss is not allowed to be offset other income and would not be required to be reported.

 

To figure out the selling price for each asset:

  1. Take the current basis of each asset against the total combined basis of all of your assets to figure out the sales price for each one; OR 
  2. Determine a fair market value for each asset against the total value of all assets to figure out the sale price for each one. 

Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset. (Choices would also be fair market value on the date of the sale or adjusted basis on the date of the sale, which is cost less depreciation.)

 

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

 

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense. I hope this example provides clarification to enter your sale.

 

Business Sale entry:

  1. Open your tax return 
  2. Scroll to Less Common Business SituationsSale of Business Property > Start or Update
  3. Click Sales of business or rental property..... > Continue > Yes 
  4. Enter your sales information (leave the depreciation amount blank)

Investment Sale entry: Where do I enter investment sales?

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