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Filing a loss on land

Forum|Forum|4 years ago
April 1, 2022
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I sold a vacant lot in 2021. The land was purchased in 2006 and sold for a $24,000 loss in 2021. I am a real estate professional and purchased the property as an investment but ended up cutting my losses last year. My question is do I report the sale (and loss) as business property (form 4797) or as sale of standard investment? The difference may mean claiming the entire loss for 2021, or not! Turbotax is ambiguous on where to claim. I am using Home and Business.

Best answer by JulieS

No, I don't think you can report that on Form 4797 as a sale of a business property.

You bought the property as a non-real estate professional for investment purposes. You never used the property for a trade or business and land is not depreciable.

Form 4797 is used to report the sale of property used in a business. There are a few exceptions to the business use, but they all involve depreciable property. Land is not depreciable.

Click here to learn more about Form 4797.

T

ThomasM125

If you qualify as a real estate professional and the property was purchased and maintained in that capacity, then the loss would be ordinary and not limited to the $3,000 capital loss yearly deduction limit.

You can see this article to make sure you qualify as a real estate professional:

Tax rules for real estate professionals

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B

bigdog80Author

Thanks for the quick response and the link. Just to be clear, let me be more specific as whether this applies to ordinary. When I purchased the lot, I held a real estate license but was still working in the corporate world, and not considered a real estate professional. In 2019, I retired from my corporate job and have been self employed as a real estate broker since that time. The lot (Land) has been sitting since 2006 when I purchased it, and was sold in 2021. It all adds up to me that it qualifies as an ordinary loss and not capital.

Can you help me confirm? Thanks!

J

JulieSAnswer

No, I don't think you can report that on Form 4797 as a sale of a business property.

You bought the property as a non-real estate professional for investment purposes. You never used the property for a trade or business and land is not depreciable.

Form 4797 is used to report the sale of property used in a business. There are a few exceptions to the business use, but they all involve depreciable property. Land is not depreciable.

Click here to learn more about Form 4797.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"