Sale of rental home - how do I handle depreciated items that have been entered over the last few years?

[azforney]

We sold our rental home this year.  We bought it in 2019 and over the last 3 years we have entered assets (home itself, refinance costs, capital improvements) in TurboTax.  They have been depreciating since entered.  Now that we have sold the home how do I handle each of these items to make sure all the depreciation is accelerated or accounted for?

[Anonymous_]

There are a couple of ways to handle this scenario in TurboTax. @Critter-3 ?

One would be to indicate each asset was sold and allocate a portion of the sales price to the asset.

Another would be to add up the bases (plural) of all of the assets and all of the depreciation deductions and then enter those figures as the sale of one asset. 

[Critter-3]

Each and every asset listed must be sold ... you will divide the sales price and the costs of sale by the appropriate ratio ...

Ok ... a simple example of ratios ...  if you have more assets than the example then you will have more lines.  Remember if you divide a big number into a littler number you get a % ...  thus 5000/100,000 = 5%

       original  cost basis          ratios                  Sales price             cost of sale 

home    80000                   80%                          160,000               8,000

land       15000                   15%                           30,000                 1,500

roof        5000                        5%                           10,000                   500 

totals     100,000                100%                        200,000               10,000

All you need to enter into the program is the % of sales price & % of cost of sale for each asset being sold and you will have to do the math yourself as the program will not do it for you if you have more than one asset (the land & building are considered 2 assets) . 

And if you have NOT been taking depreciation as required  then RUN to a local tax pro when you file this return to get this error fixed correctly so you do not pay more taxes than you are required to do ... the form 3115 you need is not supported in the TT program and it is NOT a DIY project. 

[JamesG1]

You have been reporting the original rental property asset, subsequent capital improvements and refinance costs amortization in TurboTax.  

The entire rental property investment has been reported through individual entries much like is shown below:

Original rental property purchase          $200,000

Remodel 1 costs                                           $20,000

Remodel 2 costs                                           $10,000

Refinance amortization                                  $5,000

                                                                        $235,000

Since the asset cost has been allocated over several entries, the sales price will also need to be allocated over each of these entries.

Make sure that you record the sale for each of these assets.  Follow these steps:

• At the screen, Your Property Assets, click Edit for each of these entries.
• At the screen Tell us more about this rental asset, select The item was sold, retired, stolen, destroyed, disposed of…..
• At the screen Confirm your prior depreciation, you may verify the amount of depreciation/amortization taken in prior years against the Depreciation and Amortization Report from your 2021 tax return.

[azforney]

Thank you.  One example is that we made landscape improvements in 2020 (pavers, bbq structure, artificial turf) with a total of $3732.  100% business use... prior depreciation is $416.

Sold the rental home this year in April which I also have entered "Residential" property.  In total I have the following assets:

- Mortgage Origination points

- Residential - property

- Landscaping (pavers, turf, bbq structure)

- Refinancing fees

- windows

When I go to edit each of the assets a screen is displayed that shows "Description, date, asset type, cost, business %, Prior deprec). I state that it was sold as part of the 'sale of the main home'.  After a few more screens I get the "Sales Information"  (Asset Sales Price, Asset Sales Expense, Land Sales Price, Land Sales Expenses and Property Type). This is where I am not sure what to enter.

Thank you.

Jeff

[JamesG1]

Sounds like you need to enter the selling price allocated to each individual asset entry.

The total sales price and sales expenses need to be allocated across the various items based upon the cost basis (probably the original cost).   

Assume that the original cost of the rental property was $240,000 (spread over various asset entries) and the selling price of the rental property was $300,000.  The allocation would be like below. 

                                                                      Original cost    Sales Price

Original rental property purchase          $200,000          $250,000

Original rental purchase Land                    $10,000           $12,500

Remodel 1 costs                                           $20,000            $25,000

Remodel 2 costs                                           $10,000            $12,500

                                                                        $240,000         $300,000

You would do a similar allocation for sales expenses.