In 2012 I refi'd a rental property and TT amortized the fees. I sold the property in 2015, Entering 0 on L 21 of the Asset Wks gives an error. How do I deduct the costs?

Forum|Forum|6 years ago
June 6, 2019
2 replies
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In 2012 I refinanced a residential rental property and TT amortized the fees. The entry appears on the Form 4562 Depreciation and Amortization Report as an amortization. I sold the property in 2015, but TT is not allowing me to dispose of the amortized fees and realize the loss. Entering $0 on line 21 of the Asset Wks generates an error. How do I dispose of this amortized expenditure and deduct the remaining costs?

TurboTax Home & Biz Windows

jovilady1

I'm coming across the same error. How was this resolved?

PeteM12

I'm' having the same issue as the original asker: TurboTax will NOT accept a d$0 balance for the partially depleted Amortization. Some number is required (perhaps the remaining, un-depreciated amount?) I sure would like to get this right, as the underlying sale shows a substantial, taxable gain. Thanks.

gjmoneypants

As daheater mentioned on 6/5/19 at 10:32pm, I think this is not considered to be section 1245 property. This is what I see in my TurboTax:

- Did you Stop Using this Asset in 2021? My answer is "Yes"

- Disposition Information: enter dates here

- Special Handling Required?

On this page it says that special handling is required if "This is an intangible asset not considered section 1245 property."

I was having trouble figuring out on my own if this is considered to be section 1245 property, but daheater makes me think it's not. In that case, you would choose "Yes" when asked if special handling is required. If you click yes then it gives detailed instructions on what to do next. In a nutshell, you should enter the remaining finance fees as "other expense" in the expense section of the interview.

Employee

[USE the INTERVIEW}continue to the:

Rental Summary

THEN

.sale of property <---------<<<<<now takes the place of asset ........When you click the update [radio button to right of listed property]

And Then next screen

At the property asset summary screen for your property; click edit to the right of asset

Enter the date of sale (same as the rental property) for each asset or improvement. If you have already

allocated 100% of the sales price, then enter zero for these remaining assets and improvements.

TurboTax will automatically "write off" the remainder of the basis (cost minus depreciation). You don't have

to manually do that.

Generally it maybe rather difficult to know which worksheet is the start of the interview than a worksheet that is the middle of the calculation.[produces an error]

daheaterAuthor

TT handled the sale of the property just fine, and yes, that was done thru the interview.  The problem is not with the depreciated property, it is with the amortized refinance fees, which is a separate line item on the Form 4562 Depreciation and Amortization Report.  Not all of the refinance fees have been depleted and I should be able to write-off the balance remaining.
TT states: "Schedule E Worksheet (property address) -- Asset Entry Worksheet (2012 Refinancing Fees): Asset sales price should be blank. Based on your entry for amortization code section, this intangible is not considered Sec 1245 property. Dispositions of intangibles that are not Sec 1245 property cannot be entered on the Asset Entry Worksheet. Se tax Help for specific instructions."
The error message is referring to Line 21 of that worksheet. Line 18 specifies the IRC section, which had an entry of "197".  The "On Demand Tax Guidance" for Line 18 states: "Enter the amortization code section under which you amortize these costs. For code section 197 the program uses a 15 year life. For all other code sections you must enter the recovery period."  As I said, the section code 197 was originally in that field, but that is incorrect since the amortization of refinance fees should be done over the life of the loan, in this case 30 years.
In the "On Demand Tax Guidance" for Line 18 the "amortization code section" part of the sentence is highlighted as a link. Clicking that link opens a list of some of the available "Amortization Code Sections" available for use.  the first entry in the list is "446 for most loan fees".  Changing line 18 to "446" does not clear the error. I also cannot find any information on the Amortization Code Section 446.
I will have to report the sale of this amortization with a blank Line 21 and manually apply the un-amortized remainder to the basis of the property sale.

Aspirin756

@daheater and @jovilady1 Thank you, I am encountering the exact same problem. @view2 the method you describe here simply introduces the problem described by the OP. It sets the Asset sales price to zero on line 21 of the Asset Entry Worksheet. This in turn sends the amount to Form 4797 Part I. This is what we want. But the problem is that TT gives an error for setting the Asset sales price to zero for property type L - Intangibles.

UPDATE: there is another thread on this (of course) where @view2 and others provided some additional ideas and information. Best to look there.