Cost basis conversion

Forum|Forum|3 years ago
February 3, 2023
1 reply
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Bought a house in 2007 and lived in it till 2012….converted to a rental….sold in 2022….

*purchase price $507,000 in 2007 plus $20000 in capital improvements prior to renting

*sold in 2022 for $850000 minus $80000 in selling expenses

so turbo tax brings in from 2021 a cost of $425,000 and a land value of $250000…..so it is using the difference as a basis? Since I had a gain I feel the basis should be the 507,000 plus improvements? Thanks

GeorgeM777

Need some additional information. As this was a rental, did you depreciate the property beginning in the year you made the property available for rent? If yes, what was your cost basis when you began to depreciate the property? How much depreciation did you take prior to the sale?

@jonpagel

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jonpagelAuthor

Employee

Hello, it is using the $425,000 cost and $250,000 land value that I entered when I converted to rental and has been depreciating off that since 2012, roughly $65,000….the $450,000 was the FMV at the time of conversion but since I have a gain it seems like the cost basis can be the original cost when I bought it plus capital improvements prior to the conversion which would be $507,000 and $30,000….doesn’t seem to be a way to make turbo tax do this easily or at least with my experience using it…the unit was rented from the 2012 conversion until June 25 2022, I listed it and closed on the sale roughly 2 months later in august 2022

AmyC

Employee

You are correct. You will use the full amount of your basis to reduce your gain. There used to be a box to enter an alternate basis but that confused people. You want your 1099-S to match the sales proceeds. The workaround would be to increase your sales expenses by the additional basis so that the correct gain is recorded. While not ideal, the proper tax would be paid.

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