Sold rental property in 2022, asks for land sale price, anything I put in jacks up my taxes by a fortune plus don't know answer

[psyadam]

Sold rental property in 2022, never lived in it, only rented it. Put in purchase price, sales price, get certain tax obligation. Asks for 'land sales price' which I don't know how to assess. Plus any number I play with (based on old property tax ratios or other figures) and the owed taxes go up times 30!!!

Makes no sense and can't submit without it or get errors.

Have original ratios when set it up in 2021 as a rental but property up about 50% in the year and a day we've owned, so no clue on what it is now.

Help!!!

[Anonymous_]

When you originally set up the rental in TurboTax, did you enter the purchase price for the land? 

Note that the land price you entered will be included in the total asset price.

[psyadam]

Yes I did.  Use that? The property is up substantially so using that price would seem off. And when I do, substantially increased taxes due. Very little depreciated in first (and only) year of ownership, so wouldn't think recapturing it would make 90% of profit ordinary income versus being long term cap gain. Seems no good figure for the land sale price

[Mike9241]

you have 1 sales price for the property and that needs to be allocated between the land and building (a Turbotax hangup because it does not allow you to treat the sale as a mass disposition where the tax basis of the land and building are treated as one asset like the pro versions of Intuit software) you have several options a) based on the original cost allocations allocated the sales price and sales expenses in the same ratio b) get an informal fair market value (FMV)  appraisal from a realtor and allocate based on the relative FMVs c) allocate just enough net sales price to land so no gain or loss all the gain will go to the building or d) the reverse - allocate just enough net sales price to the building to equal its original cost the rest to the land

this assumes there are only two assets for the rental - land and building - no separate capital improvements. 

your gain should be all long-term capital gain of which the amount of depreciation taken will be section 1250 gain. all the options work as long as the FMV of the building is greater than your original cost. in all cases your net gain should be the same. i suggest option a) and second option b)

+ sales price

- sales expenses

- cost of building

+ depreciation taken

- cost of land.

[psyadam]

Turbotax is NOT accounting for something somewhere in my 50% allocation (own with a partner). When I include zero land value in the sale and all in the assets, it shows profit of around 400K which is accurate. However, when I insert the land value (original from when I first set it up, it shows profit of 798k which makes no sense. Even recaptured appreciation of one year doesn't account for that. So still confused. Probably have to put call into TT to straighten it out unless someone can explain to me.

[psyadam]

Looking at the Form4797, it has an inaccurate cost basis substantially lower than purchase price, when include land cost. Is this another bug in TT?

[Anonymous_]

For the purposes of troubleshooting, it would be helpful if you posted figures for the Cost, Cost of Land, and then Asset Sales Price and Land Sales Price. The numbers could be hypothetical.

[Anonymous_]

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@psyadam wrote:

Looking at the Form4797, it has an inaccurate cost basis substantially lower than purchase price, when include land cost. Is this another bug in TT?

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No. You have an input error somewhere which needs troubleshooting.

[psyadam]

when i put numbers there, my tax owed shoots up by multiples of 20 or 30.  

[psyadam]

Yes, when setting it up initially Form D, there is 'cost' which was total cost and 'land' which were both entered. I tried that 'land' value in calculating the sale, and then lowering the 'asset sale price' but then TT doesn't add it up on the 4797 to equal the 1099 for the sale. 

And of course, that land value is purchase price, all value up on sale, but still used it.  Very confusing.

[Anonymous_]

You're probably going to have to contact Support since we can't see your return and the figures you entered.

How do I contact TurboTax? (intuit.com)

[psyadam]

When I divide sales price into Asset and Land so that it adds up to the sales price, it only puts the 'gross sales price' as the price of the Asset, which is much less than the 1099. It shows the profit appropriately and tells me no profit on the land, as using same land price as land price of purchase.

[psyadam]

Thanks, I think so. I do notice that TT does not ask for the 1099 reported sales price, although Line 1a of the 4797 does have a spot for it to be entered. That amount is NOT what is auto populated on Line 20 of the 4797 so not sure if I need to manually override it. Guess time for a call if no one has an explanation/fix for that. Appreciate all the feedback for sure

[Anonymous_]

The following is a hypothetical from the Rental section of the program where a rental property is sold. Note that expenses of sale were not entered for the sake of simplicity. 

One thing to note about the Cost is that it represents the total purchase price, including the land. So, in this instance, the cost of the land was $250,000 and the cost of the structure was $250,000 (total of $500,000).

The property was then sold for a total of $1,000,000 where half ($500,000) was allocated to the structure and half ($500,000) was allocated to the land (in the same manner as the Cost where half was allocated to the land and half allocated to the structure).

[psyadam]

Spoke to an Intuit CPA, seemed like everything was good, just the forms and data input forms are confusing. Although don't see anywhere to input my 1099S for the sale of the property, he said not to worry bout it. Suggestions on how to enter it in case I do worry?