Sale of Rental House (in other state) land/house breakdown

[squidlady]

I have some specific questions, hopefully someone can help me.

We are married and file jointly but keep most of our finances separate. My husband bought a rental house in another state about 15 years ago. It was rented for most of this time. He only had 2 tenants the entire time. His last tenant died and he sold the house last year.

My questions are:

1.  We do not expect to ever have income again from the state in which the rental house was located, since it was sold last year, that was my husband's only financial interest in that state. The interview asked if this would be the final return from that state and I checked "yes" but now the error checker is telling me "nonresident cannot be checked if filing a final return." But we are nonresidents of that state. What do we do? I unchecked  "final return" just so that the error checker could run.

2. On the Sales Information screen - it asks for Asset Sales Price (that is the entire house ) and Asset Sales Expenses. Next it asks for Land Sales Price and Land Sales Expenses. Since we did not buy or sell land separately, do we have to fill this in, or the "land" fields specifically for land sales?

3. The software shows a breakdown between the house (about $120,000) and the land ($50,000) values from when he bought the property (about 15 years ago) - this was imported from last year's return.  When he sold it, there was no breakdown in his paperwork. For the purposes of our return,  I thought it made the most sense to enter into TT the land value as the same as it was for the original purchase price - that way I did not have to change any values imported from last year - and the cap gains were computed on the house only. If we do not enter the land value here, the result is that we are paying captial gains on the total price (the sale of the house and land) - minus the purchase price of the house only. 

If we do not separate the land from the house NOW, the software is reporting cap gains which seem to be disregarding the price of the land in the home purchase, that is, it's treating the purchase price as $120,000 insteaad of $170,000. I am assuming that keeping the land value the same, and only paying cap gains on the house, the results would be the same (same total prices overall). Hope that makes sense.

4. Where is the correct field to enter the sales commission (realtor fee)? It is a part of the sales expenses but it also has its own field in a different screen?

Thank you in advance.

[ErnieS0 · Accepted solution]

Final return

You do not say what state the rental property was in. However, in general, there should not be an issue if you do not check a final return box. 

Rental Sale

You have to split the sales price between the building and land, even though they were sold together. Use the original purchase ratio. Multiply you sales price by 29.41% and that will be your land sales price. 70.59% x the total sales price will be your building price.

Land         $50,000     29.41%

Building $120,000    70.59%

Total       $170,000  100.00%

Sales Expenses

Allocate your sales expenses by the same ratio. The sales commission is part of the sales expenses. Generally your sales expenses will be anything under the paid by seller column except for mortgage interest and property taxes (if any).