Question

Sold Rental Property - Initially Used as 2nd home

Forum|Forum|3 years ago
February 25, 2023
1 reply
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I purchased a 2nd home in 2015 and used it exclusively for personal use. In 2017 I converted it to a rental and rented in until the sale in 2022. I am looking to report the sale in the screen "Sales Information." It asks me to divide, or allocate the sales price, and expenses -- focusing on the business portion only. My understanding in this example is that I need to take the sale price($100,000) and report 5/7 of this amount(years it was a rental/total years). Therefore, I would report the "Asset Sales Price" of $71000(round numbers). Is this correct?

Where it gets confusing is on one of the links it states "If your business-use percentage of the asset varied during the course of your ownership, enter only the disposition date here. Report the sales information in another section of the program by selecting Topic List in the toolbar at the top of the screen. Scroll to the Income category, then choose the Other Income topic." This statement made me think that it applies to me as the property was initially a 2nd home for personal use and then a rental(ie the business use percentage changed). However, I am unsure if I should be entering the disposition date here only or if my earlier logic was accurate. Thoughts? Thank you!

PatriciaV

Employee

If your business use percentage did not change after you converted it to a rental, then you should report the sale under the Rental Property.

The message about a variation in business use would apply if you used it (for example) 100% for business one year, but only 50% for another. If it was always a rental after conversion, this message would not apply.

Note that if you used the asset 100% for this rental business, enter total amounts in the sale section. If you had used the asset for any other purpose, you would then allocate the total amount to the percentage of use for this business. The prior history of this asset as your personal residence does not apply here.

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