Rental house fire:
Insurance payment 60K
Adjusted based on destroyed property 40K.
Replacement property purchased 50K
I enter values using Casualty Theft Summary under Deductions and Credits, and then the Deferred Gain Election screens.
------------------------------------------------------------ TurboTax says realized gain is 60K. Shouldn't realized gain be 10K, with deferred gain of 10K to be reflected in lower basis for the replacement property?
After submitting this to the community, I studied the situation further and decided that a formal support call was appropriate. The issue wasn't cleared up with the first call, so I'll post the result after my followup discussion tomorrow.
After 3 sessions with the support team, TurboTax says this calculation is too complicated for them and I should go to a CPA. It's really not that complicated... make the formula on 1033 match the written text on 1033. ...recognize gain only to the extent that the amount realized upon such a conversion exceeds the COST of the REPLACEMENT Property"
thoroughly disgusted... after 20 years on Turbotax
And if the gain is calculated incorrectly, then the basis for the next property is wrong before beginning depreciation.
I'm trying to use the same form for a condemnation of rental in 2016, and replacement purchased in 2019, and the form will not accept 2016 as the year of conversion. I can force it by putting in a 2019 date, but that's not accurate. the form also says my gain is higher than I calculate. Just a little worried to use TT filing this time. Did you wind up using it, or did you go to a CPA?
the problem is TT. it's probably not considering the 3 year period available for replacement of rental real estate [IRC 1033(g)(4)] only the standard replacement period under IRC 1033(a)(2)(B)
In my case, the amount of gain deferral I was eligible for was only about $800. I just dropped it-- didn't defer and so didn't use the form. I figured deferring taxation on $800 wasn't worth the hassle of starting new somewhere else at that point.
Of course, my "replacement property" is no longer a replacement property for tax purposes, and its basis is established independently.
I'm glad I didn't have more at stake.
Good luck.