Question

spreading costs of rental sale

Forum|Forum|4 years ago
March 26, 2022
2 replies
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I sold my rental property. Since land was not depreciated, should a portion of the sales cost still be allocated to the land when completing for 4797?

ColeenD3

Yes, you still attribute a portion of the sales expenses to the land. The buyer is purchasing the land as well as the building. Depreciation doesn't matter in this case.

G

gjgogolAuthor

@ColeenD3

I originally purchased the property for $174K (Land = $36K; House=$138K) and added $43K worth of improvements. I recently sold it for $184K (2021). I now have a total of 7 depreciable assets on Form 4562. What percentage do I use to allocate the sales price to the land? If I determine the percentages by dividing each asset value by the total asset value, it ends up DECREASING the value of the land going from $36K (2006 purchase price) down to $35K (2021 sales price). Is that OK?

ColeenD3

Yes, the fact that you had $43K worth of improvements definitely adds more value to the building.