Question

I took back a rental property that I sold on a land contract in a previous year. How do I reflect that on my taxe return?

Forum|Forum|7 years ago
June 6, 2019
1 reply
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I received LC payments for about half the year and then took the property back when the buyer could no longer afford to keep up with the property. The 2nd half of 2016, after I took ownership back, I collected rents and paid on expenses as I did for my other properties. Not sure how to deal with depreciation and what forms to fill out to correctly reflect the transaction

V

Employee

When you repossess your property after making an installment sale, you must figure the following amounts.

1.Your gain (or loss) on the repossession.

2.Your basis in the repossessed property.

Basis in installment obligation. Your basis is figured on the obligation's full face value or its FMV at the time of the original sale, whichever you used to figure your gain or loss in the year of sale. From this amount, subtract all payments of principal you have received on the obligation. The result is your basis in the installment obligation. If only part of the obligation is discharged by the repossession, figure your basis in only that part

You report gain or loss from a repossession on the same form you used to report the original sale. If you reported the sale on Form 4797, use it to report the gain or loss on the repossession.

The IRS has a worksheet to help as a template.

Worksheet D. Taxable Gain on Repossession of Real Property

http://www.irs.gov/publications/p537/ar02.html#en_US_2016_publink1000221736