Sale of Rental Property that was originally my Primary Residence

[DianeW777]

Point 1: Do not enter an asset when placed in service and removed from service the same year. Use the cost as part of the sales expenses so that  you incorporate the entire cost basis when entering the sales information.

Point 2: There should be no override in this situation and e-file should be fine.

Point 3: You are correct.  Special depreciation should be included with the sale and it is shown on the appropriate line of Form 4797. The overall gain is still being taxed as it should.

@AB-Tax 

[robertw65]

Yes, closing costs like you listed add to your basis for both original purchase and refinance.

As for the sale aspect of your question, I haven't sold any rental properties, so I don't know the mechanics of how to do it.  I would add additional assets in TT for closing costs and improvements as non-depreciable assets like land.  I would use the actual dates placed in service.  This should not cause any problems like changing the original cost basis.  As a general rule, I wouldn't change the original cost basis on any assets because the cost basis was previously submitted to the IRS on a previous return.

There are a number of ways to account for these additional costs.  I hesitate to just add them to closing costs.  If the costs are substantial, your total closing costs would appear to be too much compared to the sales price.

Again, I haven't sold any rental properties using TT.  If @DianeW777 has experience in this area, I would defer to her judgement.