Is TurboTax Premier supposed to be able to handle dispositions of rental property?

[Anonymous]

I'm using TurboTax Premier desktop edition and I cannot get it to handle the gain on the sale of a rental property. Under the depreciation section I've selected 'Yes' when asked 'Did you stop using this asset in 202x?', I've entered the date of the sale/disposition, populated the asset/land sales prices and expenses and completed the remainder of the questionnaire.

Two insane things then happen:

(1) The software decides there is "No gain or loss on this asset..." and "Based on our calculations, you have no gain or loss on your disposition..." which is very, very wrong. There is absolutely a significant  gain.

(2) In contradiction to (1) the federal and state 'tax due' counters in the top left do in fact jump up considerably upon entering the sale data. It obviously has calculated some kind of gain and correponding tax in spite of what it says. The amount of that tax is nowhere near close to correct. I know the ballpark numbers already, and what TurboTax is showing is in excess of double those amounts.

I appreciate it's early days for the 2022 edition and there is likely much yet to be patched to the software. So, I performed the same exercise in my 2021 edition and entered the sale in that year just to see what the software would do. It produced exactly the same behavior described above as in the 2022 edition.

I'm curious if others have encountered the same problem, and whether TurboTax is simply unusable for handling a disposition of rental property. Frankly, this will be a 2023 issue at which time I will entrust it to an accountant. However, I was just curious to see how far I could get in TurboTax and at least use it to validate (roughly) my Excel-calculated estimated tax. Obviously, the brackets/rates would be different but the result is not even on the same planet let alone ballpark.

[Anonymous_]

There must be an input error somewhere or perhaps there is no (or incorrect) basis information (possibly accumulated depreciation missing).

Alternatively, you could be looking at the wrong subsection in the program.

It might help if you stated whether you were using an online or desktop version of TurboTax.

[Anonymous]

Thanks for taking the time to reply.

It pulls the basis information itself as I have it in the depreciation history from the prior return. The numbers were pre-populated and correct. It also pulls the accumulated depreciation and asks me to either type the same number back in or adjust it as necessary, so I have typed that back in.

The subsection I am in is the depreciation subsection under Rental Property. The software tells you to hit Edit on that if you have stopped using the asset (and gives 'sold' as an example), which I do and that is where I have entered all the information. It is a bit fiddly in that you have to keep editing the same subsection to get additional questions to come up, but in the end all of the cost basis, depreciation and sold price data were entered with the sale price and expenses allocated between asset and land in the same proportion as the cost basis.

Even if I have made a mistake, there's still the issue that it explicitly says there has been no gain or loss but then adds a whole bunch of tax due to the counter anyway. So it's not consistent within itself regardless of my input figures.

As stated, it's the desktop edition. And if it makes a difference, it's for Mac.

[Anonymous_]

You might want to contact Support since it is difficult to diagnose and/or troubleshoot issues such as this without seeing the return.

What is the TurboTax phone number? (intuit.com)

However, before doing so you should enter Forms Mode and look at your Form 4797 to see if the figures are in the proper sections on that form.

[Critter-3]

I highly recommend you review the entire actual return and not just rely on the summary screens.  Although you may have no capital gain or loss on the asset being sold on the Sch D  you most will have depreciation recapture on form 4797. 

[Anonymous]

Thanks for the tip. I've looked at the Form 4797 and can confirm two issues:

(1) It's populating the section for property held 1 year or less. That just seems like a flat out error since the software quite clearly confirms the date acquired (which it inherits from the date put in service) and the date of sale which was entered. These are obviously many years apart. It doesn't ask me to confirm how long the property has been held, and should be figuring that out from the other inputs. There's nothing else I can do in the GUI to influence this.

(2) It's not populating the depreciation recapture or the cost. In the actual form, the field is "cost or other basis, plus improvements and expense of sale". On the user screens, it has the cost in one place (populated correctly on-screen), accumulated depreciation (also correctly populated) and the sales expense in another place (under the asset sales price). I infer it should be adding these things together, but it's only pulling in the sales expense.

Once I fudge the sales expense to include the cost, then the high tax amount calculated looks broadly in line with what I would expect if it were indeed a short term capital gain. The GUI nonetheless still tells me there is no gain or loss.

I appreciate it's difficult to investigate an issue without thorough documentation or a proper walk through of what I'm doing. (I've worked in support too.)  FWIW, I'm not doing much. I tried to keep the return as empty as possible to mock up the sale without any other income. However, I did import from my prior return so it could pull in my basic info and the depreciation history. I deleted all other prior income sources before plugging the sale data in. It's always possible some unanticipated crumb of data somewhere is tripping up the code.

At this stage, I was really just looking for feedback from the user community if others had also hit the same issue right off the bat, and had any existing support experiences, workarounds, tickets etc to share.