Question

Rental property sale that involves a redemption

Forum|Forum|4 years ago
April 6, 2022
2 replies
0 views

We have owned this residential rental property for approx. 19 years. In the 7th year we had a foreclosure which we redeemed ourselves. Now we have sold this property. How would we enter the information for the sale? Do we just do it as though we owned it the whole time without disruption? Or is there some kind of special treatment we need to give to this situation. PLEASE HELP!!!!

T

ThomasM125

You would need to go back to the year of the foreclosure to see if you filed a Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness. On that form, look on line 5 or 10(a) to see if there was a reduction in the cost basis of the house. If so, you would factor that in to determine the basis of the house that you sold. It would be deducted for the cost when determining your adjusted basis.

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

J

JansPlaceAuthor

I looked back at my old return. I did not see a Form 982. I am totally lost as to how to figure this all out. I did see that my depreciation was taken each of the 19 years I had the property. Since we are the ones who redeemed the property back then it's like we just continued the ownership. I am really stumped on how to handle this property sale information.

Actually, the redemption was in 2011, but the foreclosure may have been in 2010. We were scammed back then and it was a lot of "stuff" happening. I have not been able to locate my 2010 tax returns yet. I may need direct help for this one.

ColeenD3

Since you did not reduce the basis of the property due to foreclosure on Form 982, just ignore the foreclosure and treat the rental property as if it never existed. I am unclear about the years you took depreciation. Did you have the property rented or available to be rented the entire time? If so, your depreciation amount would be correct.

There is no information as to whether or not you rented in 2021. If you did, enter the information in the Rental Section. If not, enter it in Sale of Business Property.

Full steps for entering rental property:

The first entry for the sale is found during the set-up of the property: Tell us about your situation this year/Click Sold or disposed of property

Next, the asset section of expenses will already be checked:

*Assets

*Sold rental property

Includes info on the property you sold or disposed of. Since we know this applies to you, we've already selected it.

After you click on Asset, you will be asked about the purchase: Tell Us About This Rental Asset
In the screen Tell Us More About This Rental Asset, you will indicate the sale the date of the sale, and the date you began using it for business. You can see the screenshot in a previous answer.
Next: Confirm Your Prior Depreciation
Next: Special Handling Required?
Next Home Sale?
Next: Sales Information. This is where you will be asked about the sales price.

T

ThomasM125

You don't have to amend the 2020 return if you don't want to, you would just be giving up some income tax if you don't.

In 2021, if you enter the house as a rental asset and put in the original cost and date purchased, TurboTax will calculate the applicable depreciation for 2021 and accumulated depreciation so when you report the sale of the property, the correct gain or loss will be calculated. The same is true for 2020 if you choose to amend the return.

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