Sold Rental Property with Net Capital Gain. But the gain was deducted from Wages, Salary in Form 1040

[jesunattt]

I input my rental property information which I sold in 2020. Form 4797 line 7 shows net capital gain. But Schedule 1 line 5 shows negative. And 1040 line 8 shows a loss amount. Does anyone know why is this?

[M-MTax]

Nothing in Part 3 on your 4797? If it's rental real estate you should have depreciation allowed or allowable as Sec 1250 property on page 2 of your 4797.

[jesunattt]

In Part III, line 24 shows Net capital gain. Part II is all "0".

[M-MTax]

Did you fill out a SCH E that shows a net loss? 

[jesunattt]

Hi, Schedule E shows Net Loss. But only for year 2020 Net Loss due to depreciation. No property sales information on Schedule E.

[Critter-3]

This is one of those times you should probably NOT DIY ... the form 4797 part 1 should show the sale of the land and part 3 the rest of the depreciated assets  sold  with a depreciation taken amount on line 22. 

The sale is not reported on the sch E ... it goes from the 4797 to the Sch D and/or the 1040 Sch 1.   If you don't get it exactly correct then it will not show up properly.   I highly recommend you upgrade to one of the LIVE options  or  talk to one of the TT support technicians.  

[AmeliesUncle]

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@jesunattt wrote:

Form 4797 line 7 shows net capital gain.

But Schedule 1 line 5 shows negative. 

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Is that gain showing up on Line 4 of Schedule 1?  If so, that seems correct.

Line 5 of Schedule 1 is negative because you said the rental has a loss for 2020, so that seems correct.

So what exactly seems wrong?

[jesunattt]

Hi, Everyone, 

Thank you for all of your replies.

I finally figured it out. I'm using Turbo tax home and business. In Business Income and Expenses category, there is Rental Properties and Royalties. I should just input rental information here and select sold "rental property" during interview. In the Less Common Business Situations Category, there is Sale of Business Property. After I input rental sales information here. All the data populated back to the right form and numbers are match. I think that Turbo tax interview questions are misleading. I have the impression that all rental and sales information should be input in "Rental properties and Royalties". In fact, the sales information should be input to "Sale of business property" under "Less Common Business Situation Category". 

[Carl]

I haven't checked yet to see if things have been fixed with an update. But when reporting the sale of rental property in the Rental & Royalty Income (SCH E) section of the program, it's not showing the structure and land sales separately with the structure sale in PART I of the 4797 and the land in PART III. It's showing everything in Part I. However, the "bottom line" results are correct. That's why I never complained about this lack of reporting the structure and land sales in their respective sections of the form.

[tagteam]

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@Carl wrote:

....when reporting the sale of rental property in the Rental & Royalty Income (SCH E) section of the program, it's not showing the structure and land sales separately with the structure sale in PART I of the 4797 and the land in PART III. It's showing everything in Part I. 

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@Critter-3 had the correct answer in terms of the results of separating land and structure:

....form 4797 part 1 should show the sale of the land and part 3 the rest of the depreciated assets  sold  with a depreciation taken amount on line 22. ...

In TurboTax, Part I will be populated with the sale of the land while Part III (Section 1250) will be populated with the sale of the structure (and depreciation allowed or allowable) if the transaction is entered into the Rentals and Royalties section with the land and structure assigned separate values (cost).