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DanTz

Question

How do you report appliances still in service on sale of rental property

Forum|Forum|2 years ago
March 3, 2024
2 replies
0 views

On form 4797 I understand how to enter the sales price, cost, depreciation and arrive at the adjusted basis.

My question is how do you report and enter the data for appliances that have not fully depreciated.

I have 2 appliances with depreciation taken of $840.81, and deprecation not taken of $143.61.

Is the depreciated amount of $840.81 added to the total deprecation taken or allowed on the rental property sale, and the $143.61 depreciation not taken added to the basis as an expense.

How do you report this on form 4797.

Can you report this on line 25 as section 1250 property showing deprecation allowed as $840.81.

Appreciate your help on this.

JamesG1

If the residential rental has been sold and you are currently depreciating one or more appliances within the residential rental, the appliance(s) will be recorded as sold and the selling price allocated across the appliance(s) cost.

The sale of the appliances and any depreciation recapture will be reported on IRS form 4797. See IRS form 4797 Part III.

As an example, the residential rental and appliance was purchased for $111,000 and the selling price of $222,000 is allocated across the land, the structure and the appliance.

Purchase Sales price

Residence 100,000 200,000

Land 10,000 20,000

Appliance 1,0000 2,000

Total 111,000 222,000

The appliance is reported as sold at the screen Tell us more about this rental asset within the rental property asset screens.

Note: Sale of land reported on IRS form 4797 Part I, page 1.

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DanTzAuthor

The form for line 1b says to enter the total amount from lines 2, 10 and 24 due to partial dispositions of MACRS assets.

On line 2 I show a gain for the land for a rental property with no depreciation taken on the land.

I have zero for line 10 and on line 4 I have a gain after adjusting for deprecation taken for a rental.

If for example I have 20,000 for land gain and $80,000 for rental property gain what is supposed to be entered on 1b.

Is the amount be entered only the $80,000 for the rental property that had depreciation taken.

Appreciate a response to this message.

DanTzAuthor

Can you please provide an example of how to report the land portion of the rental property sale on Part 1 of IRS form 4797.

Appreciate the help with this being further explained.

JamesG1

Land is section 1231 property and is reported in Part I of the IRS form 4797.

The residential rental is section 1250 property and reported in Part III of the IRS form 4797.

The appliance is personal property used for business purposes and is section 1245 property reported in Part III of the IRS form 4797.

Further explanation may be found at IRS Publication 544 here.

@DanTz

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DanTzAuthor

Thank you for the earlier information that was provided.

The examples helped to explain the allocation required for land, building and appliances.

I am able to determine the allocation for the sales price and cost for the Land and Building.

However, I am not sure what Sales Price I would put on the 2 appliances.

One is in the 4th year (washing machine) and the other is in the 5th year (built in microwave) of depreciation.

I would not think they would have much of a sale value.

I have 2 appliances with depreciation taken of $840.81, and depreciation not taken of $143.61.

It would be reported as appliance under Property B and appliance under Property C.

Is the $143.61 that was not depreciated added back to the basis of the building or how is this treated?

I was thinking of using zero as the sales price or could use the remaining value of $143.61 that has not been depreciated and would zero out for gain on each. The $143.61 would be removed from the building purchased price and assigned to the appliances as well as the depreciation.

Example on one appliance:

For the cost I only used the actual cost of the appliance.

Gross Sales Price $101.57

Appliance Cost $767.93

Depreciation Taken $666.36

Adjusted Basis $101.57

Total Gain $ 0.00

This amount would get reported again on line 31 of Form 4797 as $0.00.

Would this calculation work or what would be your suggestion on how to best report this.

Does this take care of the required recapture depreciation on this item which is reported on line 22 and again on 25a as depreciation allowed. Does this depreciation that was taken on this one appliance need to be reported anywhere else?

Again, appreciate your help with this.