step up basis of rental upon death of spouse

Forum|Forum|3 years ago
April 12, 2023
1 reply
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I follow the community's suggestions of converting the rental to personal use on the date of my spouse's death. I add a new rental on the same day at the new appraised value. TurboTax generated Form 4797 with a negative number. Where does 4797 come from? What have I done wrong?

DaveF1006

There shouldn't be a 4797 generated on a conversion of a rental property to personal since you haven't sold it. The main issue is if this amount is actually reported on your return as an ordinary loss, which is what the negative number represents.

I don't know which Turbo Tax program you are using but there is a way to check to see if the amount is reported on your tax return. if using Turbo Tax online, go to.

Go to the black panel on the left side of your screen in your online program and do the following;
Now, click on Tax Tools in the black left menu bar at the bottom of the form
Go to tools>view tax summary
Now look at the menu and select preview my 1040.
Scroll in the preview until you see Schedule 1 Line 8Z. See if the negative amount in the 4797 is reported on that line.

if using the desktop version, go to forms>Schedule 1 Line 8Z and see if the negative amount is showing there. if so, let us know. if not, ignore form 4797.

@brookfield1

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brookfield1Author

Thank you DaveF1006.

I previewed my 1040 as you instructed. The negative amount (Loss) is carried over from Line 18b of Form 4797 to Line 4, Schedule 1, not to Line 8z, which is empty. I sold some stocks in 2022, which would not involve Form 4797. The loss on Form 4797 must have come from converting the rentals to personal use in order to set up the stepped up basis upon the death of my husband.

It puzzles me that Loss is generated instead of Gain. If there is recapture of any sort, it should be a gain, not loss. In any case, I thought past depreciation is not considered. Stepping up the basis of a rental is not a taxable event, whether there is a gain or

loss.

I have checked my input to all the questions on the screen more than once. Please let me know if I missed anything.