Rental property sold in January when it was empty, TT wants to delete it.

Forum|Forum|3 years ago
January 16, 2023
2 replies
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Our tenant was out in late 2021, the property was sold in mid January 2022. We never attempted to rent it while the sale was pending. When TT asks if the property was sold, it states that we'll enter the details of the sale in the depreciation section. However, once I check the box that says "I did not rent, or attempt to rent" in 2022, TT deletes the property from the file. How would I enter the sale if the entire asset/depreciation section is gone? Do I just "lie" to the program by not checking the box?

Best answer by Anonymous_

@pd215 wrote:

How would I enter the sale if the entire asset/depreciation section is gone?

What you are seeing is typical program behavior; if you do not indicate that the property was in use as a rental, the program will delete the property (and asset).

You most likely should have indicated that the property was converted to personal use in the 2021 program to stop depreciation at that point since the property was taken out of service as a rental. Of course, doing so would have created issues when you transferred your 2021 return into the 2022 program.

At this point, you can enter the transaction in the Sale of Business Property section of the program (provided you are using a version that supports it), but you will have to know the accumulated depreciation figure as well as other information about the property.

Anonymous_Answer

Employee

@pd215 wrote:

How would I enter the sale if the entire asset/depreciation section is gone?

What you are seeing is typical program behavior; if you do not indicate that the property was in use as a rental, the program will delete the property (and asset).

Carl11_2

Employee

Since you never attempted to rent it at all in 2022, what you need to do is amend your 2021 tax return and convert the property and all of it's listed assets to personal use, with a conversion date of one day after the last renter moved out. Then print out the two form 4562's for that property, as you'll need them to report the sale on your 2022 tax return in the "Sale of Business Property" section.

The two form 4562's you will need to print from your 2021 return both print in landscape format. One is titled "Depreciation and Amortization Report" and the other is "Alternative Minimum Tax Depreciation". You will definitely need the first one for reporting the sale on your 2022 return. You will need the AMT Depreciation report only if the program specifically asks you for information pertaining to the Alternative Minimimum Tax Depreciation.

Critter-3

OK ... simple fix ... just enter ONE day of rental use to keep the rental on the program so you can sell it off. Even if you did not actively try to rent it I am sure if someone offered you twice the normal rent you would have rented it out... right ?

Carl11_2

Employee

simple fix ... just enter ONE day of rental use to keep the rental on the program

Seems when I suggest that, everyone and their mother jumps down my throat screaming they can't do that, because "They didn't even try to rent it in [Tax year]!" But that's exactly what I would do. Claming 1 day rented with zero rental income is no big deal. For example, if the rental contract ended on Jan 1 of the current tax year, the rent for that one day would have been paid already in Dec of the prior tax year. So you'd have 1 day of rental in 2022 with no rental income in 2022, I see no problem with that.

The problem could arise if audited however. But the IRS is not going to bother one over something that trivial. However, if pulled for a random audit, or there's other things on the tax return that trigger an audit, finding this "one day rented" thing could potentially just be another small itty-bitty feather in the cap of the auditor.

Until and unless the new congress kills the funding for the $87,000 new IRS agents to add to the 82,000 they already have, I would suggest folks keep in mind they're not hiring those new agents to go after rich people whom it's claimed "don't pay their fair share". (Many of them do.)