Since you didn't rent it during 2017, you would enter in Sales of Business Property. There will be an area to enter your depreciation for recapture.
If this house was a rental home or
investment property -
It
depends on your rental activity during the year:
- Under the rental section - if
rented during 2017
- Under the sale of business
property - if not rented during 2017
Additionally,
when you sell a property that was used as a rental, you must pay recapture tax as well as regular
state income tax on the depreciation you claimed. (Remember the IRS will assume
that you claimed the correct amount of depreciation every year—this is true
regardless of whether you actually claimed any depreciation on your tax
return).
In
order to calculate the capital gain or loss when you sell a residence that had
been converted to rental property, you need to know three things:
- Your adjusted tax basis in
the property (both at the time of the conversion and the time of the sale)
- The sale price
- The fair market value of the
property when it was converted to rental property
If
the converted property is later sold at a gain, the basis for purposes of
determining the capital gain is your adjusted tax basis in the property at the
time of the sale. If the sale results in a loss, however, the basis used is the
lower of the property's adjusted tax basis at the time of the conversion or the
fair market value when the property was converted from personal use to rental
property. This loss rule ensures that any deflation in value occurring while
the property was held as a principal residence does not later become deductible
upon your sale of the rental property; a loss on the sale of a principal
residence is not deductible. As usual, you calculate your capital gain by
subtracting your adjusted basis from the sale price of the property.
