I sold a rental that I did a 1031 exchange on

[johnnyroddin]

I bought my first rental in May 1992 for $52,500.

I sold it in Dec 2017 for $120,000.

I did a 1031 exchange in Jan 2018 and bought a new rental for $120,000.

I sold that rental in Apr 2024 for $205,000.

For round numbers, lets says the first rental depreciated $50,000 on my taxes over 25 years.

And for round numbers, lets say the second rental depreciated $25,000 on my taxes over 6 years.

I can't find a way to plug both of these into Turbo tax.  The trick is getting that first house depreciation incorporated because it is significant. 

I bought the 2024 Premier edition hoping it would help get me through this.

I am only worried about Federal taxes.

Thanks for any help,

John

[DianeW777]

It depends. You understand that all depreciation must be recaptured at the final sale which will help as you enter this final transaction. this information will provide the details to plug in the depreciation for your sale.

 As long as you have the numbers for depreciation and this is a final sale without a like kind exchange my advice is to use the following steps to report the sale. Essentially you are taking the final rental property out of service, then entering the correct information in Sale of Business Property. 

Example of arriving at the selling price and sales expenses for each asset in your rental activity (you can add all assets together for the sale entry below except for the land which will be a separate sale.

Example:  Original Cost (of each asset on your depreciation schedule)

$10,000 Land                = 13.33% 

$50,000 House              = 66.67%

$15,000 Improvements  = 20%

$75,000 Total                 = 100%

Multiply each percentage times the sales price/sales expenses to arrive at each individual sales price/sales expense.

1. First use the Search (upper right) > Type rentals > Press enter > Click on the Jump to... link
2. Or Wages & Income > Rental Properties and Royalties > Update > Continue to Rental and Royalty Summary > Edit the property
3. Scroll to Assets/Depreciation  > Click Update > Select 'Edit' next to each asset
4. Edit beside each asset > Continue to the Tell Us About This Rental Asset
5. Select the checkbox beside 'This item was sold, retired, .... traded in ....etc. > enter the date it was sold
6. Answer the question about whether it was 100% business > Leave the original date it was placed in service (may be purchase date or later depending on your circumstances)
7. Continue to the screen 'Confirm Your Prior Depreciation'  
   • The amount displayed is only for prior years and does not include the current year. 
   • Continue until you see the current year amount displayed and make a note to add the two amounts together for the sale
8. Be sure to select it was converted to 100% personal use when you see this question
9. Answer 'Yes' to Special Handling. This stops the asset from moving forward.

Next you will complete the Sale of Business Property:

1. Income and Expenses at the top
2. Scroll down to Other Business Situations
   • For TurboTax Desktop: Business Income and Expenses > Less Common Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information:  
   1. Description of the Property (Building/ Capital Improvements)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Cost
   5. Depreciation
   6. Repeat these steps for the sale of the Land portion because it receives special capital gain treatment as an asset that appreciates.