Sold Main home originally from a 1031 exchange, where to enter the deferred capital gains from the inital 1031 exchange into Turbo Tax

Forum|Forum|2 years ago
April 2, 2024
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I sold my rental property A and complete a 1031 exchange with property B in 2018 thus, I was able to deferred my capital gains from property A. I rented property B for 24 months and then converted it into a primary residence for a little more than 3.5 years before selling it. I have entered this as a main home sale in Turbo Tax Premier but I am not able to figure out where to add in the deferred capital gains from property A. Can someone post me step by step instructions for Turbo Tax as to how to enter that in?

Thank you.

DianeW777

Yes, the accumulated depreciation you used throughout property A and Property B will be entered into the sale of home. Find this information in your prior year returns

When you enter the home sale in TurboTax it will ask for a couple of items that are needed to report the sale correctly.

The total depreciation expense that was allowed during the period it was available for rent (in your case both Property A & B). Check your prior tax returns for this figure.
The number of days the property was available for rent during the ownership period.

Results:

The amount of depreciation that was allowed will be completely taxable up to the amount of gain received on the sale.
The remaining gain if any, will be split between taxable and and amount eligible for exclusion by using the following formula.
- The total days available for rent will be divided by the total days owned to determine the portion of the remaining amount of gain that is taxable for the rental period
- The balance will be eligible for the home sale exclusion
TurboTax will do all the calculations based on your entry

Let's go step by step to enter your sale.

Scroll to Less Common Income > Select Sale of Home (revisit or update)
Continue to indicate you sold your home > Edit or add your home address and ownership > Continue
Enter the Sales date, Selling Price and Sales Expenses > Continue
Enter the Date Acquired and the Cost of the Home (includes any capital improvements for the period of ownership (do not reduce for depreciation expense) > Continue
Continue past the 'Less than two years' screen > Yes the home was used for anything else > Enter number of days used for rental purposes
Continue > Select No another home was sold after _____ date > Select ownership if married > Continue
Select Yes for Depreciation After May 6, 1997 for both of you if married > Continue > Enter the depreciation claimed after May 6, 1997 (same amount for AMT)
Continue to answer the remaining questions and you will see your 'Tax Free' gain.

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jlwjoiAuthor

Thank you for your reply.

Just to clarify, did you mean in the box where it asks Enter the depreciation claimed after May 6, 1997

The total depreciation value = deferred capital gain from property A + depreciation of property B?

DianeW777

it depends. All the depreciation from Property A carries over to Property B, which is why there is any deferred gain in the 1031 exchange. The property for your tax return only changes in name and then possibly an additional asset is added for the increase in additional funds paid or loan transferred to you.

If you have a deferred gain figure, it could be the depreciation you used on Property A. Property A was not required to be entered or treated as a sale because under the tax law it was allowed to receive Section 1031 like kind exchange treatment. This reduces the cost basis in the property given up, which transfers to the property received. Plus a possible additional asset for any 'but up'. Not it sells and there is no trade, the sale is treated like the firs property was never given up and all gain is captured as a taxable event.

I hope this provides a clearer picture. Please add any additional questions here for assistance.

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