Reporting Sale of Rental Property in Turbo Tax

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Alana888
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Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 06, 2020 12:41 pm

I have a small business, several rental properties, mutual funds, itemized deductions, etc and I have been successfully doing my taxes with Turbo tax for the last 4 years.

In 2019 I sold an out of state rental property and though I expected a learning curve, I am totally confused about what Turbo Tax is asking for or where to put it.
It seems Turbo tax has entered a cost for the building (not sure where they got that number from) I don’t see any place to enter a cost basis for the land, though the instructions talk about entering this. I have 4 years of passive real estate income carry over loss which should almost exactly cancel out the recaptured depreciation I should owe, but I have no idea where to find or enter either of these numbers or to check if they are being included automatically

Turbo tax seems to think I owe tax on about $150,000 income, though I bought the property for $204,000 (including sales costs and initial upgrades and sold it for $300,000 ($298,000 if we deduct closing costs), so it seems I should owe tax on about $96,000 (given carry over loss should cancel out recaptured depreciation for the property)
I am not exactly sure where Turbo tax got the numbers they are using for the cost so I am reluctant to change them. I have never told them the cost of the land so I am pretty sure they are not taking that into consideration, nor the original improvements or sales costs. I dont see any place to include cost basis for he land.

I also don’t know how to deal with the other items I have depreciated for this property over the years (appliances, plumbing improvements) and I don’t see anywhere to put the upgrades and costs that should be added to my original cost basis, or how to report disposal of the depreciated appliances, some of which died a natural death and some of which were sold with the property.

I would likely be able to figure it out if I knew what Turbo Tax was doing with the numbers, but they just ask a question and come up with a result that is clearly not accurate without being transparent about how they came to that conclusion so I can’t tell where the problem is

I tried calling Turbo tax to see about getting help and after 7 hours of cyclical recordings I finally reached someone who disconnected me while trying to transfer me to someone who could help me. This happened a total of 3 times and took all day so I am frustrated.

I am willing to pay for help with this, but I could not get anyone at Turbo Tax to tell me if their $80 live help includes the ability to talk on the phone. With all the moving parts, I don’t think I could explain what I need and receive help though the tedium of their chat boxes.

I have tried calling some CPA’s but most are too busy right now (my ACA subsidy- which I will lose this year due to the sale- makes it not possible for me to file an extension) The CPA’s willing to help me just want to do my entire return which is not what I want as I have have already completed most of my taxes with the exception of this piece and would like to keep using Turbo tax due to all the info they store for me and carry over year to year. What I need is someone to walk me though this sale of rental property part of my return in Turbo Tax step by step and tell me what to put where.

My questions for people here are ~

1- Can anyone tell me how/where to report this rental property sale in Turbo tax in a way that will handle the cost basis of the land, building, original sales costs and upgrades and deal with the recaptured depreciation, carry over loss, depreciated appliances and capital gains?

2- Has any one used Turbo Tax live help for $80 and if so were they helpful?. Were they available to talk on the phone or only chat box?

3- Any other recommendations on how to get help with this. Ideally I would love to pay someone familiar with this part of Turbo tax and tax law for a half hour of their time to walk me through this or to talk to Turbo Tax support on the phone. Or perhaps there is some online resource that can guide me?. I have searched and found some answers to my questions online, but the guidance they provide does not align with what I am finding in Turbo Tax

Thank you for any suggestions or help

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Thu Feb 06, 2020 1:03 pm

I have a similar situation. I have a partnership (1065 return) inside of which I sold a rental property which had improvements that I've also been depreciating. I'm not using turbotax, I'm using taxact, but maybe I can help a bit, although I'm still figuring out a couple things as well. I'm not sure about your return and if you're business is a pass through entity or not, so I'm not sure how much of the below applies, but this is how I have been proceeding.

Land:
This is not depreciable. As I understand it this gets input into form 4797 part I (1). You will need to split out land value from total sale value. I used the same split that I used when separating land and building for depreciation purchases. There are other methods

Building:
This is depreciable. As I understand it this gets input on form 4797 section III (3) This calculates the depreciation.

Other depreciable improvements:
This is where I'm getting stuck. I have my depreciation schedule and if I tell taxact that I simply "sold" each of these improvements at the time I sold the building, it seems to calculate things pretty well. The problem is, it puts each of these on form 4797 as a different "property" I don't think this is correct.

My solutions? I added all the depreciation figures from the depreciation schedule and input it in taxact as a single property. The problem with this is the final depreciation calculation will be wrong as it takes the total basis (building + everything depreciable) and depreciates it at the 27.5 year schedule. I think the solution to this is to simply override the taxact final deprecation number and enter it directly.

So, that's a long way to say that you need to figure out how the Q&A version of TurboTax populates form 4797. This is what I played with for a while before I figured it out in Taxact. I hope this helps.

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 06, 2020 1:13 pm

Thank you for your reply. I do understand the tax law and what is required. I just don't understand where to enter what in Turbo Tax so that it ends up on the correct form in the correct place and includes all the recaptured depreciation and carry over loss. I wish there was a way to just fill out the required forms directly but I dont know how to do that in Turbo tax or exactly what forms are required. TT doesn't even let you see the forms until you pay which I don't want to do until I know I am going to be able to make this work as opposed to paying a CPA to do the whole thing (if I can find one at this point), but I might have to pay TT just to get a look at the forms which might help me to figure things out but maybe not

For your situation I think you would put each depreciated item as a separate "property" since they would each have a different timeline for depreciation.

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Thu Feb 06, 2020 1:18 pm

Alana888 wrote:
Thu Feb 06, 2020 1:13 pm
Thank you for your reply. I do understand the tax law and what is required. I just don't understand where to enter what in Turbo Tax so that it ends up on the correct form in the correct place and includes all the recaptured depreciation and carry over loss. I wish there was a way to just fill out the required forms directly but I dont know how to do that in Turbo tax or exactly what forms are required. TT doesn't even let you see the forms until you pay which I don't want to do until I know I am going to be able to make this work as opposed to paying a CPA to do the whole thing (if I can find one at this point), but I might have to pay TT just to get a look at the forms which might help me to figure things out but maybe not

Ahhhhh, I see your problem. I have the downloadable version of Taxact which lets you toggle between forms view and Q&A so I can see what's getting populated in real time. I'm not sure how I would have approached it without that capability because then its just a black box churning numbers under the hood.

Do you have the downloadable version of TurboTax? If not, maybe that is the solution assuming it works like TaxAct does and lets you see the forms.
Alana888 wrote:
Thu Feb 06, 2020 1:13 pm
For your situation I think you would put each depreciated item as a separate "property" since they would each have a different timeline for depreciation.
Thanks for your feedback, I don't mean to hijack your thread. This is what taxact did, it listed each item as its own property, so maybe I'll re-enter it that way.

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 06, 2020 1:30 pm

duplicate deleted
Last edited by Alana888 on Thu Feb 06, 2020 1:32 pm, edited 1 time in total.

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 06, 2020 1:31 pm

Hmm. Thank you for the suggestion. Maybe I will try the downloadable version though I am not sure my very old computer can handle it which is why I use the online version.

Yes that is exactly my problem. I can't see what Turbo tax is doing with the info so I can see how they came to their erroneous conclusions about how much I owe so I can't figure out how to correct it. I need someone familiar with this aspect of Turbo tax to guide me on what to put where in their interface so I can be sure it gets to the appropriate place on the forms required

Yes turbo tax also lists each "property" (washing machine, refrigerator, etc) separately which I think is correct. Their use of the word "property" for both the entire property as well as for the dishwasher inside it is confusing but I think accurate.
Good luck to you. I appreciate the response.

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unclescrooge
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by unclescrooge » Thu Feb 06, 2020 1:38 pm

Always use the downloadable version. The web version isn't as comprehensive.

niceguy7376
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by niceguy7376 » Thu Feb 06, 2020 1:45 pm

Did you not use turbotax for the prev years you had this property and document basis and depreciation?

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 06, 2020 2:28 pm

niceguy7376 wrote:
Thu Feb 06, 2020 1:45 pm
Did you not use turbotax for the prev years you had this property and document basis and depreciation?
Yes I did. They seem to have the cost basis for the building and the depreciation for the building
I am not seeing any place to enter the cost basis for the land or original upgrades and they don't seem to include that in their calculations which might be why they are incorrect.

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unclescrooge
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by unclescrooge » Thu Feb 06, 2020 6:06 pm

Alana888 wrote:
Thu Feb 06, 2020 2:28 pm
niceguy7376 wrote:
Thu Feb 06, 2020 1:45 pm
Did you not use turbotax for the prev years you had this property and document basis and depreciation?
Yes I did. They seem to have the cost basis for the building and the depreciation for the building
I am not seeing any place to enter the cost basis for the land or original upgrades and they don't seem to include that in their calculations which might be why they are incorrect.
That is usually entered the first year and carried forward. Again, use the downloadable version and see if that helps.

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Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Fri Feb 07, 2020 12:42 pm

Doesn't seem like I can use the downloadable version unless I upgrade my computer so I am stuck with the online version for now.
I am sure the online version can do this if I can figure out where to enter the numbers. TT is filling in the cost basis of the building that I gave them the first year, but it does not have the cost basis for the land and I haven't been able to find where to enter that.

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Fri Feb 07, 2020 2:20 pm

Alana888 wrote:
Fri Feb 07, 2020 12:42 pm
Doesn't seem like I can use the downloadable version unless I upgrade my computer so I am stuck with the online version for now.
I am sure the online version can do this if I can figure out where to enter the numbers. TT is filling in the cost basis of the building that I gave them the first year, but it does not have the cost basis for the land and I haven't been able to find where to enter that.
I actually upgraded my computer this year partially because of the need for a windows 10 machine to do taxes on, but primarily because of end of support for windows 7. If you do financial stuff on your computer, upgrading would be a good idea anyway.

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Fri Feb 07, 2020 10:52 pm

I appreciate the response. I tired to use the download version but it wont work on my computer.
Its not possible for me to upgrade my computer (and all that would go with that, replacing all the software that won't run on a new operating system, etc) right now for this.

I am sure there must be a way to report the sale of a rental property in the online Turbo tax program. I just need a little guidance that the folks at Turbo Tax have not been able to provide (spent over 5 hours on the phone). The people there seem to know nothing about their program. Far less than I do.

I have figured out a work around to report the cost basis of the land, but I am still not sure how/where to include the passive loss carryover from prior years as it doesn't seem that Turbo tax is doing that automatically since the amount they are taxing me for the rental property dale is about $ 20,000 more than it should be.

Is "non recaptured Section 1231 losses" the same as prior year passive activity loss carryovers? If so maybe this is where I would enter the loss carryovers though I am surprised TT wouldn't do that automatically as it has those numbers.. If anyone is familiar with this and can offer guidance through this, that would be great. I am sure its not that hard.

cadreamer2015
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by cadreamer2015 » Fri Feb 07, 2020 11:28 pm

If you are not able to buy a newish computer to run the download TurboTax program you may need to bite the bullet and have a CPA do your entire return. Though that might cost as much as a new computer - you could get a perfectly capable new laptop for $500 or so.
De gustibus non est disputandum

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Sat Feb 08, 2020 8:31 am

Alana888 wrote:
Fri Feb 07, 2020 10:52 pm
I appreciate the response. I tired to use the download version but it wont work on my computer.
Its not possible for me to upgrade my computer (and all that would go with that, replacing all the software that won't run on a new operating system, etc) right now for this.

I am sure there must be a way to report the sale of a rental property in the online Turbo tax program. I just need a little guidance that the folks at Turbo Tax have not been able to provide (spent over 5 hours on the phone). The people there seem to know nothing about their program. Far less than I do.

I have figured out a work around to report the cost basis of the land, but I am still not sure how/where to include the passive loss carryover from prior years as it doesn't seem that Turbo tax is doing that automatically since the amount they are taxing me for the rental property dale is about $ 20,000 more than it should be.

Is "non recaptured Section 1231 losses" the same as prior year passive activity loss carryovers? If so maybe this is where I would enter the loss carryovers though I am surprised TT wouldn't do that automatically as it has those numbers.. If anyone is familiar with this and can offer guidance through this, that would be great. I am sure its not that hard.
I think you're only other reasonable option is to pay TT now so you can see the forms. I wouldn't trust any of this without being able to see the forms.

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Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sat Feb 08, 2020 10:45 am

Yes if I don't receive any responses from someone who is familiar with how turbo tax handles sale of rental real estate I will pay for Turbo Tax to hopefully glean more from the forms and pay the $90 extra to have one of their "experts" help me. My experience with their experts so far hasn't been promising so I was hoping there would be someone here with a little more knowledge about this. Thank you to everyone who took the time to read and respond

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Sat Feb 08, 2020 10:47 am

Alana888 wrote:
Sat Feb 08, 2020 10:45 am
Yes if I don't receive any responses from someone who is familiar with how turbo tax handles sale of rental real estate I will pay for Turbo Tax to hopefully glean more from the forms and pay the $90 extra to have one of their "experts" help me. My experience with their experts so far hasn't been promising so I was hoping there would be someone here with a little more knowledge about this. Thank you to everyone who took the time to read and respond
I really think if you can pay so you can see the forms you'll be able to figure it out. It may take some time but you can either fill out the forms directly, though not recommended by TT, or do the Q&A. You should be able to figure out how to answer the questions to get the forms to fill out the way you want. This is what I did with TaxAct. It took a while, but I finally figured it out.

decapod10
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by decapod10 » Sat Feb 08, 2020 9:41 pm

I'm not sure about the online version specifically, but in the desktop version of Turbo Tax, sale of rental property is under Business Items rather than investments.

Business Items -> Sale of Business Property.

Data Entry is very simple, just asks for Dates of Purchase, Date of Sale, cost basis, sale price, and depreciation taken, that's it.

FWIW, if you have a Windows machine, it's worth upgrading to Windows 10. Windows 7 is no longer supported so you won't get any more security updates and you will be more vulnerable attacks. Spending $500 on a new computer is probably worth it IMO rather than risking loss of bank accounts/brokerage accounts/retirement accounts.

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Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sat Feb 08, 2020 10:35 pm

I'm not sure about the online version specifically, but in the desktop version of Turbo Tax, sale of rental property is under Business Items rather than investments.

Business Items -> Sale of Business Property.

Data Entry is very simple, just asks for Dates of Purchase, Date of Sale, cost basis, sale price, and depreciation taken, that's it.
Yes I entered all this for the building but there was no place for the cost basis of the land so the numbers were off due to that number missing. I found a workaround to add the land (added it as a separate asset with no depreciation and no profit or loss) but the calculation is still off about $50,000 on taxable income. It could be that they aren't counting the carryover loss but I am not sure and dont know where to check or correct this if it is the case
FWIW, if you have a Windows machine, it's worth upgrading to Windows 10. Windows 7 is no longer supported so you won't get any more security updates and you will be more vulnerable attacks. Spending $500 on a new computer is probably worth it IMO rather than risking loss of bank accounts/brokerage accounts/retirement accounts.
Thank you for your input. I have a MAC and can't get a new one for $500.I am not familiar with the Windows OS or interface. I am going to figure out how to make the online version work. It seems like a huge detour to purchase a new computer, learn a new operating system just on the off chance that I wouldn't have the same issues in TT as I currently do.

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Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sat Feb 08, 2020 10:38 pm

I really think if you can pay so you can see the forms you'll be able to figure it out. It may take some time but you can either fill out the forms directly, though not recommended by TT, or do the Q&A. You should be able to figure out how to answer the questions to get the forms to fill out the way you want. This is what I did with TaxAct. It took a while, but I finally figured it out.
Yes I have come to the same conclusion. I was hoping to find someone familiar with this aspect of the TT program to guide me but I will pay for the program and if I still can't figure it out I will pay the extra $90 for their "experts" and maybe one of them will be able to help me figure out where the error is and how to correct

Much thanks to everyone who took the time to read and respond

MarkNYC
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by MarkNYC » Sat Feb 08, 2020 11:10 pm

Alana888 wrote:
Sat Feb 08, 2020 10:35 pm
Yes I entered all this for the building but there was no place for the cost basis of the land so the numbers were off due to that number missing. I found a workaround to add the land (added it as a separate asset with no depreciation and no profit or loss) but the calculation is still off about $50,000 on taxable income. It could be that they aren't counting the carryover loss but I am not sure and dont know where to check or correct this if it is the case.
I am not familiar with TurboTax input, but will add this. In the sale input area, look for a box to check "total disposition" or something similar. This will allow the carryover losses associated with the property to be currently deductible. The gain will get reported on Form 4797 then flow to Schedule D. The carryover loss does not reduce the gain - it gets deducted separately on Schedule E.

Topic Author
Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sun Feb 09, 2020 12:01 am

I am not familiar with TurboTax input, but will add this. In the sale input area, look for a box to check "total disposition" or something similar. This will allow the carryover losses associated with the property to be currently deductible. The gain will get reported on Form 4797 then flow to Schedule D. The carryover loss does not reduce the gain - it gets deducted separately on Schedule E.
This is so helpful. Thank you. This is exactly the kind of input I was hoping for.
Now I know what forms to look at for the gains and losses so I can figure out where their numbers are coming from and what might be incorrect.
I hadn't realized the gains and carryover losses would show up on separate places and that he loss would be on schedule E. Now I can check to make sure its there. Thank you!!!!

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Sun Feb 09, 2020 8:38 am

MarkNYC wrote:
Sat Feb 08, 2020 11:10 pm
Alana888 wrote:
Sat Feb 08, 2020 10:35 pm
Yes I entered all this for the building but there was no place for the cost basis of the land so the numbers were off due to that number missing. I found a workaround to add the land (added it as a separate asset with no depreciation and no profit or loss) but the calculation is still off about $50,000 on taxable income. It could be that they aren't counting the carryover loss but I am not sure and dont know where to check or correct this if it is the case.
I am not familiar with TurboTax input, but will add this. In the sale input area, look for a box to check "total disposition" or something similar. This will allow the carryover losses associated with the property to be currently deductible. The gain will get reported on Form 4797 then flow to Schedule D. The carryover loss does not reduce the gain - it gets deducted separately on Schedule E.
Very good point. Somehow you need to tell the program that you sold the property or 4797 will never be created and prior year losses won't be released. TaxAct specifically asks if you sold the property during the Q&A.

decapod10
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by decapod10 » Sun Feb 09, 2020 11:58 am

Alana888 wrote:
Sat Feb 08, 2020 10:35 pm
I'm not sure about the online version specifically, but in the desktop version of Turbo Tax, sale of rental property is under Business Items rather than investments.

Business Items -> Sale of Business Property.

Data Entry is very simple, just asks for Dates of Purchase, Date of Sale, cost basis, sale price, and depreciation taken, that's it.
Yes I entered all this for the building but there was no place for the cost basis of the land so the numbers were off due to that number missing. I found a workaround to add the land (added it as a separate asset with no depreciation and no profit or loss) but the calculation is still off about $50,000 on taxable income. It could be that they aren't counting the carryover loss but I am not sure and dont know where to check or correct this if it is the case
Hmmm - In my version there is no option to separate the land from the building. It's just the cost of the entire property, the only boxes are:

Descripton: (Rental Property)
Date Acquired: (1/1/1980)
Date Sold: (1/1/2019)
Total Sales Price: (200,000)
Cost of Property (tax basis) plus expenses of sale: (150,000)
Depreciation Taken on this property: (10,000)

The information gets copied into form 4797. If I put the example info into the program:

The Summary output you get is:

Line 30 = 60,000
Line 31 = 10,000
Line 32 = 50,000

Which is what I would expect.

The $50,000, which is the gain in the property not including depreciation gets copied into Schedule D, which subsequently goes to Form 1040 Line 6 (Capital Gains).
The $10,000 depreciation goes into Schedule 1, which gets copied into Form 1040 as line 7 (Additional Income).
The net effect is $60,000, however the depreciation recapture is counted as additional income and the actual sale of the property is Capital Gains

panhead
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Sun Feb 09, 2020 12:22 pm

decapod10 wrote:
Sun Feb 09, 2020 11:58 am
Hmmm - In my version there is no option to separate the land from the building. It's just the cost of the entire property, the only boxes are:

Descripton: (Rental Property)
Date Acquired: (1/1/1980)
Date Sold: (1/1/2019)
Total Sales Price: (200,000)
Cost of Property (tax basis) plus expenses of sale: (150,000)
Depreciation Taken on this property: (10,000)

The information gets copied into form 4797. If I put the example info into the program:

The Summary output you get is:

Line 30 = 60,000
Line 31 = 10,000
Line 32 = 50,000

Which is what I would expect.

The $50,000, which is the gain in the property not including depreciation gets copied into Schedule D, which subsequently goes to Form 1040 Line 6 (Capital Gains).
The $10,000 depreciation goes into Schedule 1, which gets copied into Form 1040 as line 7 (Additional Income).
The net effect is $60,000, however the depreciation recapture is counted as additional income and the actual sale of the property is Capital Gains
For TaxAct there is a question under the sale of business property to enter items disposed of that were not previously entered in depreciation. This is where you enter the land value, you add it as non-depreciable real property (ie, land) and it shows up on part 1 of 4797. Above is good info, now you just need to figure out how to enter something in turbotax and get it to show up on 4797 part 1, ie, line 2, as this is where land should go. The building and any depreciable improvements appear to be entered as you did above.

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Alana888
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sun Feb 09, 2020 1:06 pm

Thank you so much for these responses. Understanding where things are supposed to show up on the IRS forms is very helpful as now I know where to check as I try different strategies in TT. Not knowing where to look on the forms made it pretty impossible to figure out.

When I first began renting the property in 2014, TT prompted me to enter the building only as an asset so they could calculate the depreciation. When I did this they asked for the cost of the building only which I calculated and entered (purchase price minus land price + costs)
Now that I am selling, TT already has that original (building) number as the purchase price for the "asset" and I have been strongly warned not to change it.
The problem is- it creates an incorrect capital gain because the cost basis they have doesn't include the purchase price of the land and yes there is nowhere to enter it (that I could find)
So they are calculating the difference between the cost basis that they have (which doesn't include land) and the sale price (which does)

So what I did was create another asset of just the land, using the difference between my full purchase price and the cost basis I used for the building as the cost basis for the land (I also factored in the closing costs etc) I then indicated that I sold the land also for the same amount I used as the purchase price for the land so no loss, gain or depreciation on the land.
I believe this gives me the correct total purchase price and land price.
I subtracted the price allowed to the land from the sale price in entered for the building.
I haven't check on the forms yet to see how this worked because I didn't know where to look.
Now that I know where this is supposed to show up on the forms (thank you) I can check and make sure it happens correctly and try different corrections if it doesn't

YES there was a box to check that I disposed of the entire property which I did for the building, the land and the other depreciated assets as they were all listed separately.

Even with the addition of the land cost, they are still calculating my gain at about $33,000 too high. Since the amount of the the discrepancy is about the same of the amount of the carryover loss I am assuming the problem that they are not including the carryover loss but I wont know for sure until I look at the forms which I will have time to do tomorrow. Now that I know that is supposed to show up on Schedule E I will see if there is some way to make this happen. If its already there, then the problem is somewhere else.

I appreciate so much the info about how TT transfers info to the forms and the guidance on what forms and what lines on those forms the numbers are supposed to be. This will help me enormously in figuring this out. Without knowing that is was hard to know where to look for the problems

Once I look at the forms I will come back with any additional questions.

In the meantime does the way I added the land cost basis seem ok? I guess I will know when I check to see how it showed up on the forms

Thank you again for your help. I so appreciate it

decapod10
Posts: 529
Joined: Thu Dec 28, 2017 6:46 pm

Re: Reporting Sale of Rental Property in Turbo Tax

Post by decapod10 » Sun Feb 09, 2020 1:11 pm

panhead wrote:
Sun Feb 09, 2020 12:22 pm
decapod10 wrote:
Sun Feb 09, 2020 11:58 am
Hmmm - In my version there is no option to separate the land from the building. It's just the cost of the entire property, the only boxes are:

Descripton: (Rental Property)
Date Acquired: (1/1/1980)
Date Sold: (1/1/2019)
Total Sales Price: (200,000)
Cost of Property (tax basis) plus expenses of sale: (150,000)
Depreciation Taken on this property: (10,000)

The information gets copied into form 4797. If I put the example info into the program:

The Summary output you get is:

Line 30 = 60,000
Line 31 = 10,000
Line 32 = 50,000

Which is what I would expect.

The $50,000, which is the gain in the property not including depreciation gets copied into Schedule D, which subsequently goes to Form 1040 Line 6 (Capital Gains).
The $10,000 depreciation goes into Schedule 1, which gets copied into Form 1040 as line 7 (Additional Income).
The net effect is $60,000, however the depreciation recapture is counted as additional income and the actual sale of the property is Capital Gains
For TaxAct there is a question under the sale of business property to enter items disposed of that were not previously entered in depreciation. This is where you enter the land value, you add it as non-depreciable real property (ie, land) and it shows up on part 1 of 4797. Above is good info, now you just need to figure out how to enter something in turbotax and get it to show up on 4797 part 1, ie, line 2, as this is where land should go. The building and any depreciable improvements appear to be entered as you did above.
Ok, I'll look and see what I can find when I get the chance later. I'm not as familiar with the passive rental losses aspect of software because I don't qualify for that since I'm not considered a real estate professional, so it was much simpler when I sold property awhile back.

Topic Author
Alana888
Posts: 106
Joined: Thu Apr 10, 2014 3:50 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sun Feb 09, 2020 1:44 pm

Ok, I'll look and see what I can find when I get the chance later. I'm not as familiar with the passive rental losses aspect of software because I don't qualify for that since I'm not considered a real estate professional, so it was much simpler when I sold property awhile back.
Thank you

Passive carryover losses are not just for real estate professionals. If you do not materially participate in the management of the property (i.e. if you have a property manager) the losses you can take each year against your profits and income are limited.
Losses for rental property can be significant because of the depreciation so any excess losses beyond what is allowed each year to offset gain on the rental property is carried over each year until the property is sold and then is all deductible at that time. I have about $35,000 in carryover losses that should be applicable now that the property is sold

panhead
Posts: 372
Joined: Fri Feb 22, 2013 10:53 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Sun Feb 09, 2020 2:26 pm

Alana888 wrote:
Sun Feb 09, 2020 1:06 pm
In the meantime does the way I added the land cost basis seem ok? I guess I will know when I check to see how it showed up on the forms
For the original purchase, yes I agree that it is simply the difference between original purchase price - building basis+purchase costs.

Now, for the sale portion, I'm not sure that I agree that the land didn't change value.

What I did was look at the current valuation of land and improvements in my tax assessment. then I took the percentage of land versus total assessment percentage and multiply that times the purchase price to get what the purchase price for the land. This has the advantage that if it increases the value of the land it will result in more of a long term capital gain and less depreciation recapture.

I also allocated purchase price and sales costs across everything (building, land, sales costs) by figuring the percentage of each based on each's original percentage of the total basis.

I'm not a tax professional, I'm not even sure this is correct, but I believe it is at least correct mathematically and defendable.

JGoneRiding
Posts: 1880
Joined: Tue Jul 15, 2014 3:26 pm

Re: Reporting Sale of Rental Property in Turbo Tax

Post by JGoneRiding » Sun Feb 09, 2020 2:59 pm

Have you been using turbo tax all along? Its definitely easier if you have. Then it got thr value from your original depreciation number and it also has a land value.

Basically it would have used purchase price then whatever you put in to start depreciation for the improvement then it would back calculate a land value.

I found it easiest to go back and forth from question to forms repetitively till I was sure TT was doing it correctly.

anonsdca
Posts: 310
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Re: Reporting Sale of Rental Property in Turbo Tax

Post by anonsdca » Sun Feb 09, 2020 3:13 pm

I also sold an out of state rental this year, am a Mac user, and use TT so I am commenting for when I do my taxes in case I have the same issues. Good information on this thread.

rascott
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Joined: Wed Apr 15, 2015 10:53 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by rascott » Sun Feb 09, 2020 3:15 pm

I have used TT for years and had no issue with when doing a disposition of a rental property. I know for a fact they had me input the land and building values separately. I'll look this week and see how exactly this was setup.

As to improvements you did over the years..... those should have been recorded the years they occurred.... and would have had their own depreciation..... the exception is that under safe harbor rules.... you can just fully deduct/expense anything in the year that it occurred, if it's under 2% of the property value.

So the year you bought appliances..... those likely could/ should have just been fully expensed in that year. If you didn't do that, you likely could go back and file amended returns. How much in "improvements" are you talking about?

decapod10
Posts: 529
Joined: Thu Dec 28, 2017 6:46 pm

Re: Reporting Sale of Rental Property in Turbo Tax

Post by decapod10 » Sun Feb 09, 2020 7:38 pm

So passive real estate losses are located on my version under the Rental Properties and Royalties section which is recorded on Schedule E.

After you put in the address and such, it will ask "Do any of these situations apply?

One of the checkboxes is "I have passive activity real estate losses carried over from a prior year". This should be entered as a negative number.

When you check the box and continue, then you can enter how much passive losses you have, and it copies over to schedule E.
From Schedule E, it then copies over to 1040 Line 7a (Other Income)

There are 5 sections for rental income:
Property Profile
Rental Income
Expenses
Sale of Property/Depreciation
Vehicle Expenses

I think most of the things you are looking for are in "Sale of Property/Depreciation" section. They allow you to take depreciation on Land Improvements, Real Estate Property, Rental Property appliances, etc. While you are going through this section, there is also a spot where you can check a box saying that you sold the property, then it asks you the following

Asset Sales Price
Asset Sales Expenses
Land Sales Price
Land Sales Expenses

After you put everything in, then it calculates your gains then puts it in Schedule D and Schedule E, then to Form 1040 Line 6 (Capital Gains).

1040 Line 7b takes your gains on the sale from line 6, then subtracts (or I guess "adds" technically since 7a is a negative number) your passive income losses in Line 7a along with all your other income.

Topic Author
Alana888
Posts: 106
Joined: Thu Apr 10, 2014 3:50 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sun Feb 09, 2020 8:07 pm

Thank you decapod10 !!
Asset Sales Price
Asset Sales Expenses
Land Sales Price
Land Sales Expenses
For some reason it does not say land sale price. for me,just asset sale price and asset sales expenses. That is my problem.
Maybe I entered something incorrectly in the first place
So passive real estate losses are located on my version under the Rental Properties and Royalties section which is recorded on Schedule E.
After you put in the address and such, it will ask "Do any of these situations apply?
One of the checkboxes is "I have passive activity real estate losses carried over from a prior year". This should be entered as a negative number.

When you check the box and continue, then you can enter how much passive losses you have, and it copies over to schedule E.
From Schedule E, it then copies over to 1040 Line 7a (Other Income)
I have another question about this
Turbo tax has already entered the passive carry over losses from prior years, up to 2018.
Under that there is a box that says " I have passive activity losses to report on schedule D or form 4797 and if I check that some more boxes come up to pu in numbers. Would I put the losses for this year (2019) there? I sold the property late November so I still have depreciation and loss for this year. Or is that for something else and does TT deduct the current year. Please let me know if I am supposed to put anything in those boxes. Thank you

decapod10
Posts: 529
Joined: Thu Dec 28, 2017 6:46 pm

Re: Reporting Sale of Rental Property in Turbo Tax

Post by decapod10 » Sun Feb 09, 2020 8:14 pm

Alana888 wrote:
Sun Feb 09, 2020 8:07 pm
Thank you decapod10 !!
Asset Sales Price
Asset Sales Expenses
Land Sales Price
Land Sales Expenses
For some reason it does not say land sale price. for me,just asset sale price and asset sales expenses. That is my problem.
Maybe I entered something incorrectly in the first place
So passive real estate losses are located on my version under the Rental Properties and Royalties section which is recorded on Schedule E.
After you put in the address and such, it will ask "Do any of these situations apply?
One of the checkboxes is "I have passive activity real estate losses carried over from a prior year". This should be entered as a negative number.

When you check the box and continue, then you can enter how much passive losses you have, and it copies over to schedule E.
From Schedule E, it then copies over to 1040 Line 7a (Other Income)
I have another question about this
Turbo tax has already entered the passive carry over losses from prior years, up to 2018.
Under that there is a box that says " I have passive activity losses to report on schedule D or form 4797 and if I check that some more boxes come up to pu in numbers. Would I put the losses for this year (2019) there? I sold the property late November so I still have depreciation and loss for this year. Or is that for something else and does TT deduct the current year. Please let me know if I am supposed to put anything in those boxes. Thank you
I'm not really sure if it would be that, or it would be where you normally put in your rental income/expenses for the current year.

Topic Author
Alana888
Posts: 106
Joined: Thu Apr 10, 2014 3:50 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Sun Feb 09, 2020 8:39 pm

I have used TT for years and had no issue with when doing a disposition of a rental property. I know for a fact they had me input the land and building values separately. I'll look this week and see how exactly this was setup.
Thank you!
Yes this seems to be the consensus but I have spent countless hours looking and I can't find anywhere to enter the land sale price separately
It could be that I set it up incorrectly in the first place so I am trying to figure out how to fix that. The building asset has the building cost basis and a place for the building sale price and sale expenses and thats all
I haven't been able to find anyplace for the land cost basis (which may or may not have been entered somewhere when I purchased the property) or the land sale price.

All of the improvements were either deducted in the year they were purchased or depreciated over 5 years and now have been marked as sold I don't think there is any problem with them.

Topic Author
Alana888
Posts: 106
Joined: Thu Apr 10, 2014 3:50 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 13, 2020 5:26 pm

Maybe I should start another thread for this, but I will try here first. With all of your help I have figured much of this out but have encountered a new problem.
Since I have several rental properties I have passive carry over loss on several different properties. It seems that Turbo tax has used all of the passive carry over loss from all my properties against my ordinary income in this year. This is not what I wanted to do. I would like to only use the carry over losses from this particular property as I will need the carry over losses to offset gains when I sell the other properties.

Is that something the IRS allows and if so
Is it possible to tell turbo tax that I just want to use the carry over losses from this property?

panhead
Posts: 372
Joined: Fri Feb 22, 2013 10:53 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by panhead » Thu Feb 13, 2020 5:43 pm

Alana888 wrote:
Thu Feb 13, 2020 5:26 pm
Maybe I should start another thread for this, but I will try here first. With all of your help I have figured much of this out but have encountered a new problem.
Since I have several rental properties I have passive carry over loss on several different properties. It seems that Turbo tax has used all of the passive carry over loss from all my properties against my ordinary income in this year. This is not what I wanted to do. I would like to only use the carry over losses from this particular property as I will need the carry over losses to offset gains when I sell the other properties.

Is that something the IRS allows and if so
Is it possible to tell turbo tax that I just want to use the carry over losses from this property?
Yes, you should definitely start a new thread for this as it's a tax question, not a turbotax usability question. I 'think' that when there is a situation where previously non-allowed passive activity losses can be released, they have to be, I don't think you get to pick and choose when to use them. The sale of a property is one of those situations, tho I would imagine it also depends on how the property is held, ie, partnership, llc, corporation, etc. In other words, I really don't know.

Start a new thread.....

Topic Author
Alana888
Posts: 106
Joined: Thu Apr 10, 2014 3:50 am

Re: Reporting Sale of Rental Property in Turbo Tax

Post by Alana888 » Thu Feb 13, 2020 5:59 pm

Will do
Thank you

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