Yes, you prorate. Or to more accurately explain it, you will "divide" the sales price across all assets. Understand that you will only divide the sales price of the structure. You will *not* change, alter or allocate the sales price of the land. You only divide/allocate the sales price of the "depreciable" assets. Since land is not depreciated, you don't change that price.
Please read the below to understand the importance of allocating your structure sales price correctly.
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 ahve a selection on it for
"I sold or otherwise disposed of this property in 2018". Select
it. After you select the "I sold or otherwise disposed
of this property in 2018" 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 2018" 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.
