Solved: We bought a home in 2006, rented a room for 18 mos in 2006 and 2 mos in 2018 our daughter lived in the rest. Is the sale a business sale or a sale of a second home?
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We bought a home in 2006, rented a room for 18 mos in 2006 and 2 mos in 2018 our daughter lived in the rest. Is the sale a business sale or a sale of a second home?

We never lived in the townhouse, our daughter lived in it the entire time.  We rented it from 10/2006 to 5/2008 then again for a little over 2 months in 2018 before we sold it in July.  

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Level 15

We bought a home in 2006, rented a room for 18 mos in 2006 and 2 mos in 2018 our daughter lived in the rest. Is the sale a business sale or a sale of a second home?

It's the sale of a 2nd home. The business use was incidental. If you filed a Schedule E for tax years 2006-2008 and claimed depreciation and/or a loss**  on Schedule E, then you will have to claim the "depreciation recapture".  Depreciation recapture is a special category long term capital gain, taxed at ordinary income rates.

When you enter the sale, as the sale of a 2nd home, TurboTax will ask about prior depreciation. To enter the sale, type> 1099-S <in the find box.

** If you did not claim depreciation, but claimed a rental loss on Schedule E, you are still required to recapture the depreciation "allowable". 

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Level 15

We bought a home in 2006, rented a room for 18 mos in 2006 and 2 mos in 2018 our daughter lived in the rest. Is the sale a business sale or a sale of a second home?

It's the sale of a 2nd home. The business use was incidental. If you filed a Schedule E for tax years 2006-2008 and claimed depreciation and/or a loss**  on Schedule E, then you will have to claim the "depreciation recapture".  Depreciation recapture is a special category long term capital gain, taxed at ordinary income rates.

When you enter the sale, as the sale of a 2nd home, TurboTax will ask about prior depreciation. To enter the sale, type> 1099-S <in the find box.

** If you did not claim depreciation, but claimed a rental loss on Schedule E, you are still required to recapture the depreciation "allowable". 

View solution in original post

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