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New Member

rental property sale

If I bought a property in 2002 as a primary residence for 180000 then i refinanced the property in 2005 and used it as a rental property then isold it for 315000 in 2017 when i refinanced the property in 2005 the property had a appraised value of 310000. can i use 310000 as my cost basis?

4 Replies
Level 15

rental property sale

Absolutely not. When selling rental property, your cost basis is:

-What you paid for it when you originally purchased it. (The refi does not figure into this at all)

- Add to that what you paid for any property improvements while you owned it.

- Subtract from that any and all depreciation taken on the property while it was a rental. If you did not take depreciation as required by law, then you must reduce  your cost basis by the amount of depreciation you should have taken.

If you have been correctly reporting the rental over the years in TurboTax, here's how to report the sale so the program will take care of all that math for you.

  • Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will ahve a selection on it for "I sold or otherwise disposed of this property in  2017". Select it. After you select the "I sold or otherwise disposed of this property in 2017" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even it it's zero. Then you MUST work through the "Sale of Assets/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets. You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset. Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1. Likewise if you sold at a loss then you must show a loss on all assets, even if that loss is $1

Basically when working through an asset you select the option for "I stopped using this asset in 2017" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

New Member

rental property sale

nothing to do with my question, this was my home-1986 to 2016-not rented for a day!

Level 15

rental property sale

@bill308   Then please start your own new question and give your details.  Do you have a question?

New Member

rental property sale

what form do i use to report sale of home?

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