selling rental property

[seattlefuze]

I already filed my taxes for 2022.  My question relates to a rental property I sold in 2023.  I believe my computations in TT are correct thus far.  My concern is that I have to get the land value added somehow so that the gain is computed using a cost basis including the land.  Any help on what specific actions I need to accomplish this next year would be appreciated.  I would obviously like to efile.  Thanks!

[Anonymous_]

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@seattlefuze wrote:

Any help on what specific actions I need to accomplish this next year would be appreciated.  I would obviously like to efile. 

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You will need to go into Forms Mode and change the basis on the Asset Entry Worksheet. 

You will also need to adjust the accumulated depreciation figure on that worksheet (I presume you have your Depreciation and Amortization Report so look at that for reference). 

If you are still having difficulty comprehending this, then you should contact Support when you do your return for 2023.

This procedure is not overly complex as it only involves a couple of entries but you need to know which entries and it would help if someone could see your return during that process (hence, the suggestion to contact Support).

[Anonymous_]

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@Opus 17 wrote:
I think we are not clear on what you did.

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You are not clear on what @seattlefuze did. I know exactly what occurred and it's simply that the land value (basis of the land) was never entered into the program when @seattlefuze went through the Rental Properties and Royalties section; only the building (depreciable basis) was entered. 

[Carl]

If you correctly identified the property as "residential Rental Real Estate" when you entered it, then you were asked for two things:

1. Total cost basis of the property.

2. Cost basis of the land.

Then, the program (not you) subtracts the cost basis of the land from the total cost basis and sets that as the depreciable cost basis of the structure.

The screen that asks for this information looks as below (in the desktop version of TTX 2022). So do you have a figure in both the total cost and cost of land boxes?

[Anonymous_]

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@Carl wrote:

Then, the program (not you) subtracts the cost basis of the land from the total cost basis and sets that as the depreciable cost basis of the structure.

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That would be correct, of course, but apparently @seattlefuze did not enter a value for the land.

[Carl]

That would be correct, of course, but apparently @seattlefuze did not enter a value for the land.

IN that case since land is not depreciated, one can add the value of the land to the existing amount in the COST box. Then enter the value of the land in the LAND box. When the program "does the math", you'll end up with the same depreciation basis as before. Then your reporting of the sale with the correct cost basis. for both structure and land.

[Anonymous_]

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@Carl wrote:

IN that case since land is not depreciated, one can add the value of the land to the existing amount in the COST box. Then enter the value of the land in the LAND box.....

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Doing so will change the depreciation figure calculated by the program.

[Carl]

Doing so will change the depreciation figure calculated by the program.

Actually, it's won't. I had this happen to me about 10 years or more ago.  Say you have a cost of $100,000 and nothing in the Land value box. With that, 100,000 is depreciated over 27.5 years.
Year's later you realize you forgot to enter the value of the land, which is $20,000. So you enter $120,000 in the cost box, and $20,000 in the LAND box. The program will continue to depreciate on the $100,000 value originally entered.

Of course, this only works if the original value you entered was only the structure value. Otherwise, form 3115 will be required to fix this.

[seattlefuze]

The costs entered did not include the land value.  That is why I thought that the depreciation would not change, since the updated values would net ($100k in your example) to the cost being depreciated in TT to date.  So, it sounds like I can update the values using the asset worksheet, correct?  Will doing this result in me not be able to efile?  If yes, is this the only approach I have available? 

Thanks!

[Anonymous_]

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@seattlefuze wrote:

Will doing this result in me not be able to efile? 

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No, if you do not see any lines highlighted in red, you will be able to e-file (but note that e-file is closed for the 2022 tax year).

[Critter-3]

Ok ... LAND is not depreciated so if you failed to enter the land value in the past simply add the land as an asset when you file the next return.  This is an informational entry used only when you sell the property.