Sale of a rental condo 4797

[Linda991]

I sold a rental unit in 2023,  

I allocated the sales price to all the assets 
there is the building plus 2 separate renovations, some Railings, new A/C 

All assets were  coded as asset type I - Residential real estate

When I allocate  the sales price,  the two Renovations are showing up on page 1 of 4797

Not on Page 2 which will handle recapture.  

Both renovations were Purchased in 2018 and 2019,  All the other asset are before 2018

I dont understand why these 2 renovation values are on Part 1 while the other 5 assets associated with the 

sale are on 4797 page 2 .  

What would be my data entry mistake? 

[JamesG1]

Are the two items listed in Part I or Part II on page one of IRS form 4797 Sales of Business Property?  See here.

Is there an allocation for land in Part I of IRS form 4797 Sales of Business Property?

[Linda991]

Sorry for the delay.  
The property has  8 assets on depreciation schedule.

First - The building and land are part of one asset  with allocations for building & land. The land sale 
portion is showing up correctly in Part 1.  The building sales is showing up correctly in Part 2

This asset was typed  an i-residential rental real estate and purchased in  2005.

Subsequently , I had purchased Roof, railings, A/C, Appliances, Hot water heater . These assets are are correctly showing up in part 2  4797 . They were all purchased before 2017.

The problem I mentioned above  lies with the  renovations  purchased  in 2018 and 2019. 
Summarized as  2 assets (one per year)   both  have  same asset type I-residential rental real estate 

there is no land associated with it, but it has been depreciated  27.5 years SL /MM

But they are showing up on Part 1 of the 4797   along with the land.  I dont believe this is correct. and I cant figure out why . 

[Linda991]

I think I figured it out.  The property I sold was a lousy investment and the allocable portion of the sale to the improvements actually generated a loss,  therefore there would not be recapture depreciation.  

[MonikaK1]

You are correct, you don't have depreciation recapture if you sell at a loss. Depreciation recapture is governed by sections 1245 and 1250, according to the Internal Revenue Code (IRC). Your loss is governed by IRC Section 1231.

See this TurboTax tips article for more information on selling at a loss.