Bargain sale of residential rental property

Enter your income and expenses for the rental portion of 2021 and then print it. You will need the information to enter the sale elsewhere.

Special rules apply to sales to a related party and gifting of equity. 

No loss deduction is allowed to a taxpayer when the transactions involve a related party or a gift of equity. This requires some math when entering the sale of business or rental property.

When entering either of these transactions into Sales of Business Property, you will have to make manual adjustments to the basis to prevent the loss from showing.  Keep these figures on hand as back-up for this adjustment.

1) Wages and Income

2) Other Business Situations

3) Sale of Business Property

4) Other Property Sales

5) Select Sales of Business or Rental Property that you haven't already reported

6) Choose No to the question, "Do all of the following apply to the property you sold?".

7) Choose Yes to the following screen that asks, "Do any of the following descriptions apply to the items you sold?".

😎 Select the type of property from the drop-down box.

9) Enter the information for your sale.

Example: You purchased the property for $250,000. The FMV is now $300,000. You sold it to a related party or gifted equity with a sales price of $200,000. The program as it stands would show the loss. You must decrease the basis to equal the sales price in order to not show the loss. 

The new owner's basis is still $200,000, regardless of how you entered your sale in the program.