selling rental property

[seattlefuze]

When I originally added our rental property to turbotax I did not include the cost associated with the land.  Now, when I indicate that I sold the rental property, how do I add the land cost so that TT correctly computes the gain?  Thanks!

[Anonymous_]

Are you actually using TurboTax Business? If so, which type of return are you preparing?

You should be able to enter a basis for land in Forms Mode on the asset worksheet.

[Mike9241]

after adding the land, as a sepatare asset, you must allocated a proportion of the sales price and selling costs to the land bsed on relative fair Value.  

[seattlefuze]

Thanks for your reply.  I am doing a joint return using TT home and business.  Are you suggesting I should add the land cost directly into the forms.  Thank you.

[Anonymous_]

You can add the cost of land on your Asset Entry Worksheet.

Note that you may need to make an adjustment to your prior depreciation figure. 

[seattlefuze]

Thanks.  Since the depreciable asset costs were all entered correctly in TT, and only the land cost was not entered, why would the accrued depreciation change.  Thank you.

[Anonymous_]

The accumulated depreciation might change (probably will change) because you're changing the allocation of your basis between land and improvements (primarily the structure). 

The program will decrease the depreciable basis if the land figure is increased. Note that you could simply leave the entries as they are currently since the unrecaptured Section 1250 gain (depreciation recapture figure) will not change.

[seattlefuze]

Thanks.  I appreciate your help.

I am unclear of your responses.

If the cost of depreciable assets do no change, and only the cost of land (not depreciated) is added, how would the depreciation change?

since my land cost is not included, if I do not add the land cost my gain will be overstated.  I do not understand what you are suggesting in your last paragraph. 

thank you.

[Anonymous_]

For example:

Total Basis including the land (i.e., no land basis previously stated): $500,000

Accumulated (prior) depreciation: $200,000

If you indicate that your land basis is $100,000, then your accumulated depreciation will change because the $100,000 will be subtracted from the $500,000 in the program.

Try it out in the program. You don't have to save the file when you're finished.

[seattlefuze]

What if I increase the depreciable asset value to include the allocated cost of the land and also add the land cost, such the the cost of the depreciable assets less the cost of the allocated land is equal to the prior cost of the property?  Thanks again!

[Opus 17]

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@seattlefuze wrote:

What if I increase the depreciable asset value to include the allocated cost of the land and also add the land cost, such the the cost of the depreciable assets less the cost of the allocated land is equal to the prior cost of the property?  Thanks again!

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I think we are not clear on what you did.

Suppose you bought the house for $100,000 and placed it into service as a rental.  At the time of purchase, the land value was $15,000.  Did you list the rental as having a depreciation basis of $85,000, or did you list it as having a depreciation basis of $100,000 (which ignores the fact that the land doesn't depreciate)?  Also, what year was this (how long ago--i.e. how much needs to be fixed)?

[seattlefuze]

I added the rental property in 2017 with a cost not including the land cost, so 85,000 in your example.  As such my cost of the property does not include the cost of the land, which I thought works fine for depreciation, but not when we sell the rental property since our cost is light by the cost of the land and our gain will be overstated by the cost of the land 

[seattlefuze]

So, using your example, I am suggesting that I increase my property value to 100,000 and add 15,000 as the associated land value, resulting in my depreciable value staying at 85,000,

[seattlefuze]

I meant "cost" and not "value."

[Opus 17]

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@seattlefuze wrote:

So, using your example, I am suggesting that I increase my property value to 100,000 and add 15,000 as the associated land value, resulting in my depreciable value staying at 85,000,

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I understand--the dollar value of the accumulated depreciation doesn't change because it was calculated on the correct basis, but the program doesn't know about the additional basis of the land.

I can't help you fix it because I don't use this section of the program.  I suspect that you are using Turbotax for 2022 installed on your own Mac or PC, since it is too early for 2023, and the 2022 online version should be closed.  It's possible that adding it to the asset table won't change anything else important.  Or, it might be possible to add the basis of the land to one of the internal program worksheets by means of the override function.  Note that overrides prevent e-filing (but it's too late for that anyway) and may void the accurate calculation guarantee.  If you want to try an override, I can page a couple of people who might be able to tell you where to find it.

@rjs 

@Critter-3 

@Carl