How to calculate tax

[txs_my_lord]

I recently sold a joint ownership (50/50) rental property for $600,000 (total).  The closing cost and mortgage was $300,000 (total).  So after paying off these the remaining is $300,000 (total).  I should get $150,000, however, I agreed previously that I will only take $120,000.  When filing tax return, how do I calculate?

[Anonymous_ · Accepted solution]

How have you been reporting the rental income and expenses in the past?

Have you been taking depreciation deductions on an annual basis?

Do you have a partnership agreement (either written or verbal)?

Will you be receiving (or have you already received) a tax reporting statement (a 1099-S)?

These answers to the foregoing questions will dictate how you should properly report your share of the proceeds (and gain) from the sale.

[Hal_Al]

The mortgage payoff is irrelevant. The $300,000 net proceeds is irrelevant. What's relevant is the capital gain. Net sales price (after expenses, but not mortgage) less cost basis.  Then comes "depreciation recapture", an increase in your capital gain, but taxed at a different rate.

In determing how to report the split, you usually follow the money.  As tagteam said, more info is needed. 

[txs_my_lord]

Have you been taking depreciation deductions on an annual basis?

Didn't claim depreciation at all and will file Form 3115 next year

[Anonymous_]

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@txs_my_lord wrote:

Have you been taking depreciation deductions on an annual basis?

Didn't claim depreciation at all and will file Form 3115 next year

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The need to have a 3115 prepared coupled with the fact that the sale is part of a divorce settlement calls for guidance from a local tax professional.

Preparing and filing Form 3115 is not a DIY endeavor.