Asset & Land Sales Price & Expenses for rental that was sold

Forum|Forum|4 years ago
March 5, 2022
2 replies
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Hello,

I have searched for any keywords to read prior questions, but I'm still clueless!

I have sold a rental in 2021 after several years of renting it. I am at below TT screen:

Q1. I have a 1099-S where I have the total gross proceeds from the sale listed. I also have added up all sales expenses (i.e. closing cost) from the HUD document. That should answer the 1st and 2nd box above. Is that correct?

Q2. How do I calculated the 3rd box (Land Sale Price)? I do have the initial purchase price and land value from a few years back when I purchased the rental. I also have the most recent property tax assessment for 2021. Do I use these to find land value? If so, which one?

Q3. And finally, how do I calculate the 4th box (Land Sale Expense)?

Thanks!

LeonardS

You do not have to calculate separate values for Box 3 and Box 4.

The 1099-S list the total gross proceeds including the land and your HUD document summary accounts for all the expenses of the sale. Leaving these boxes empty will not impact your tax return.

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fkhalilzAuthor

Thank you very much for your response.

So just to make sure I understood. I can put the total proceeds (1099-S reported amount) in Box #1. And for Box #2, I can put the total closing cost, leaving Box #3 and #4 blank. Is this the correct understanding?

If so, why is this TT screen even prompting me to fill in Box #3 and #4?

Thank you!

LeonardS

Yes, that is correct 1099-S in Box 1 and total closing cost in Box 2. Turbotax asks these questions to be inclusive of all possible situations that a taxpayer may encounter when preparing your tax return. In your return Box #3 and Box #4 are not required.

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Carl11_2

Employee

For starters, disregard the 1099-S. That form only shows you the cash you were paid at the closing, and nothing more. Most likely, the amount does not include what was used from the sale proceeds to pay off the existing mortgage, property taxes, and other monetary obligations. You get your numbers from the HUD-1 statement you received at the closing.

Do the math to figure what percentage of your original purchase price was allocated to the land value when you initially purchased the property. Then use that same percentage to allocate a portion of your sales price to the land. Once you've allocated an appropriate amount to the land, the remaining amount has to be allocated among the structure and any other depreciable assets you may have listed in the Sale Of Assets/Depreciation section.

Q3. And finally, how do I calculate the 4th box (Land Sale Expense)?

Same percentage you used to figure Q2 above.

fkhalilzAuthor

@Carl11_2

Carl, regarding your response to question #2 above, does it matter whether I use the tax assessment for the year I bought the property vs. the tax assessment for the year I sold the property to calculate the ratio? Of course the ratio of land and building will compute to different percentages for each assessment. However, will it make any difference in the taxes I owe to IRS? I tried it both ways with TT and the amount of taxes owed came out to be the same. Please confirm.

Thank you!

AmyC

Employee

@Carl11_2 is correct. On Q2 he states use the assessment from the purchase to determine your percentages. Multiply times the sales price for the land sale value. However, if yours comes out the same way, the land value must be keeping the same percentage through the year's with the tax assessor's office. Pretty impressive for them. Then, you would not have a difference in the tax value since the land to home percentage is the same.

@fkhalilz

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