Sale of 100% rental property, cost basis, improvements, depreciation

Forum|Forum|4 years ago
April 9, 2022
1 reply
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I need help figuring out the math associated with the sale of rental property.

I bought a condo apartment in 2003 for $82k - this shows up as my purchase price in TT.

Throughout the history of my property, I purchased appliances for a total sum of $6k. All of them have been fully depreciated.

After my last tenant moved out in 2021, I made a major renovation totaling $27K.

TT shows the total amount of depreciation is $55k.

Is my adjusted cost basis = $82k + $6k + $27k - $55k = $60k?

If so, where exactly should I enter the cost of improvements in TT - both $6k and $27k?

I sold the apartment in 2021 for $200k. I had $12k in sales expenses.

Is my total gain = $200k - $12k - $60k = $128k?

Thanks in advance!

ColeenD3

Yes, your basis is more or less as you describe, but you have to isolate the appliances and give each a sales price. You then have to apportion some of the sales price to the assets.

Carl11_2

Employee

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in 2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets. You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset. Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.