Inter-spousal transfer: How to enter Rental Income and Expenses?

[avacado]

In 2020 my spouse and I separated and filed separately.  We split the income, expenses, and depreciation on our rental property.  In 2021 we did an inter-spousal transfer of the rental property and as of 9/1/21, I have full ownership of the rental property.  

- In the rental property profile, I specified 50% ownership.

- In the Rental Income section, I entered the total amount of rent for the year, and it gave me 50% as rental income.  However, prior to 9/1/21 I was receiving 50%, but after 9/1/21 when I took full ownership, I was receiving 100% of the rent.  How do I record this?

- Similarly, in the Expenses section, there are maintenance fees, utility fees, and property taxs that were split 50% up to 9/1/21 & then paid 100% by me after 9/1/21.  How do I record those?

Thanks so much.  In a previous post I've already gotten great advice to get the correct depreciation amount for an inter-spousal transfer, and I was hoping that advice of adding a second rental asset would've just magically taken care of the rental income and expenses, but it didn't.

[JillS56]

Sometimes to get information accurately entered into TurboTax we have to make adjustments to the way information is entered or workaround to get the information entered correctly.   

My suggestion on getting your information entered correctly would be as follows:

1. Change your ownership interest from 50% to 100%.
2. Calculate 50% of the rental income and expenses for the period from January 1, 2021 through September 1, 2021.  
3. Add the 50% rental income to the 100% of rental income from September 1, 2021 to the end of the year.  This is the amount that you enter into TurboTax as income.
4. Add the 50% of the rental expenses to the 100% of rental expenses (do this by category of expense (i.e. maintenance fees, utility fees, and property taxes). These are the amounts to enter into TurboTax for each expense item.  
5. This will give you your total rental income and rental expenses for 2021.  

Your spouse can then report her 50% for the period of January 1, 2021 through September 1, 2021.   She should do the same on her return, change the 50% to 100%.   

For depreciation, you would need to take the amount of depreciation for the year and divide this amount by 12 months and then multiply that amount by 8 months and divide by 2 to get the amount of depreciation for the first part of the year.  Then take the monthly depreciation and multiple by 4 to get the remaining four months.   Your total depreciation would be one-half of the 8-month amount plus the 4-month amount.   

[avacado]

Re: Depreciation.  

The depreciation value is automatically calculated in TurboTax; I couldn't find a way to manually add the depreciation amount.  How do I enter this prorated depreciation?

[JillS56]

To make the adjustment on the Asset Entry Screen on Line 7, Percentage of Business Ownership to 74%.   This will give you the amount of depreciation for the 50% of 8 months and 4 mounts at 100%.   

Or take the amount of the full depreciation for 100% and then divide that amount by 12.  Take the monthly amount of depreciation and multiply by 8 and divide by 2.   This is the 50% amount for the first 8 months of the year.   Then take the monthly amount and multiply by 4 months.  This gives you the amount of the depreciation for the last 4 months and adds this to the 50% amount of the first half of the year.   This will give you the total of your share of the depreciation for 2021.  

[avacado]

If I change the business ownership percentage to 74% (to adjust the depreciation), won't it also change the Rental Income and Expenses?

I'm confused about the mechanics of entering the data in TurboTax.