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jar2260
Returning Member

Sale of Rental Property

I purchased this property approx. sixty years ago, one of the questions that turbotax ask is the total of accumulated depreciation.

Do I need to go back ove the last sixty years to determine the total depreciation taken?

My basis for all intensive purposes is zero!

1 Reply
Carl
Level 15

Sale of Rental Property

Basically, if you've owned the property for 60 years then your cost basis is zero "PROVIDED" it was actually classified as residential rental real estate for 27.5 years or more of the 60 years you owned it. If so, then the total depreciation taken would be your cost basis, which makes your adjusted cost basis zero.
Finally, this is assuming you did not pay for any property improvements during the time it was classified as a rental.
Also, if you have been reporting this property on SCH E with TurboTax, the program will deal with this for you provided you reported your rental income on SCH E on your 2017 tax return. Otherwise, if you'll pull out the tax return for the last year you rented it out, you can find what you need there. In that return you'll find two IRS Form 4562's that print in landscape format for that specific rental property. One is titled "Depreciation & Amortization Report" and the other is "Alternative Minimum Tax Depreciation". You need to the first one. Just add together the amounts in the "prior year depr" and "current year depr" column to get the total amount of depreciation taken.
Now if the property was still a rental in 2018 at the time you sold it, and furhter assuming you have been reporting and depreciating things correctly over the years, you can report the sale in the SCH E section of the program, and it will do all that math for you. The below guidance should help.

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.


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