Question

Erroneous Residential Sale being triggered by converting business property to F/T residence?

Forum|Forum|4 years ago
April 7, 2022
1 reply
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Former residence has been rented F/T for the last few years through 8/31/21, at which point I've reoccupied the property as my F/T residence since 9/1/21. TT instructions are to enter a disposal date in order to effect the conversion of the asset to personal use. I assumed this would stop depreciating the asset, which it appears to have done, but it also has recorded a loss on sale. The loss is generated as a result of finding no proceeds for the "phantom" sale / disposition, although I can't follow the NBV and loss computation either. I walked the TT reps through the process on my screens but they couldn't identify the problem. Any help would be appreciated.

TurboTax Home & Biz Windows

M

mglauner

In the Rental section, under Property Profile, indicate that you 'converted this property from a rental to personal use in 2021.' On the next screen, indicate that it was 'rented all year', even though you moved back into it in 2021. This means it was 'rented all year up to date of conversion'.

Then, in the Assets/Depreciation section, check the box box to indicate 'the item was sold, retired... converted to personal use...' and the date.

Make note of the 'Amount of Depreciation' on the next screen. If you later sell the property, you will need to report this in the Sale of Business Property interview, although it will also appear on your Form 4562, Depreciation Report.

Under 'Special Handling Required' choose Yes, and TurboTax shows the amount of 2021 Depreciation (which will claimed on Schedule E on your 2021 return).

You should not be asked any questions about 'Sale' or 'Sales Price'.

Continue, and you will see a screen displaying 'Your Profit or Loss' which refers to the loss that will be reported on Schedule E in your 2021 return on Line 22.

You may see 'Your Net Loss' and 'What you can deduct'. The difference (suspended loss) will carry over to be used later if you start renting again (or sell the property). You will see this on Schedule E, in the Carryforward Section, Line G.

If this is not what you are seeing on your Schedule E, you may want to step thru the above Rental sections again.

Click this link for more info on Converting Rental Property to Personal Use.