Sale of Rental 2022, and how to pay capital gains

[jrolls]

Inherited rental property in 1987 of which my mother owned 50% with her sister. Sold in February 2022 for $950,000 reported on 1099-S-no rent collected this year. Realtor has determined FMV when acquired at $150,000, but no land value provided. Depreciation taken estimated at $66,000 (most likely my mom's share). Do I enter this sale with expenses from Seller's Settlement Statement under Sale of Rental or Business Property or Rental Properties and Royalties at 50% or 100% for proceeds and expenses? I understand that I cannot claim any past improvements, since they were claimed each year, but there were some plumbing expenses taken through escrow. Please help me determine how to calculate land and house values and which TT screen to enter the information correctly. Thank you!

[AmyC]

1. 50% or 100% 

If you own half the house the closing agent should have issued you a 1099-S based on your ownership. If the 1099-S is incorrect, contact the issuer to see about getting it corrected. If they refuse, enter the full amount and then subtract out the nominee portion. You will need to issue a 1099misc with the income to the nominee. 

2. Calculate land and house values and where to enter

I am going to assume that you own half the property since you said inherited 50% in 1987. Your inherited basis is the value of her share of the house when she passed. If the house was depreciated before your inheritance, it has nothing to do with you and your basis. If you have been renting the house since 1987 and taking depreciation, then it does need to be subtracted from the basis. (If you inherited the other half of the house, you would add that half of the value when your aunt passed to your mom's half.)

You mention taking expenses each year which leads me to believe you are in a partnership that rents out the house. The partnership would handle the sale on the partnership return just as it has the rental.

As sole owner, If you have been doing a sch E, rental, you would: 

• mark that you sold the property. See I sold my rental property. How do I report that? 
• see  Real Estate Tax Center| IRS 
• already have the house and land separated as only the house can be depreciated. 
• You may need to file a 3115 -if the depreciation has been wrong all these years.

If you have not been renting the house, you would enter the sale on sch D. See Where do I enter the sale of a second home, an inherited home, or land on my 2022 taxes? House and land are not separate items so the land value is not needed.

Please see Publication 551 (12/2022), Basis of Assets - IRS to determine your basis in the house, depreciation and items that can be added from the selling expenses.

You will need to reply with more information as it sounds to me like you don't know you are in a partnership with a rental property.

@jrolls