Selling Rental Property

[MsTabbyKats]

First time doing this:

Client lived in home until 2011

Moved and rented it out

I adjusted the basis for depreciation purposes for land value.

When I enter the info for the sale....is it the total cost of the home?

Am I supposed to adjust the sale price for land?

[mcb39]

If I understand you correctly, you have already adjusted the basis on depreciation for the land.  (added to the basis).  You would not adjust it again on the sale as the land was part of the sale.

[MsTabbyKats]

I subtracted the cost of the land when the property was put into service.

 

So...for example if they received $100,000 for the sale from the buyer...would I report that they received $80,000 for the sale (of the house)?

[Abby Normal]

Set the land up as a separate asset and do a bulk disposition. Add selling costs on the disposition screen.

[Pacun]

I normally add the cost of the land to the cost of the house.

 

So if the house cost $100K and when you are ready to depreciate you notice that the cost of the land is $70, then you depreciate only $30. At the time of selling, then you add the $70 to the basis and you should be OK.

 

Find out if they qualify for exclusion based on the time they lived in the house when it was sold.

[MsTabbyKats]

This is a real sad story.

 

They bought the house in 2007 (I think)...and got the $8500 bonus...but that was when you had to pay it back if you didn't live in the house for 3 years.

 

They both got laid off in 2009.  They got jobs in separae states.  They still have jobs in separate states.

 

So, they had to pay back the $8500...and rent out the house.

[BulldogTom]

You have 2 issues here.  You have the cost basis from when they bought the house and land, and the depreciable basis from when they transferred the home to a rental.  If those 2 amounts are the same, and I would suggest they should not be, the disposition is simple.   If you don't have the land on the fixed asset schedule, put it on and do a bulk disposition.  Everything will flow through the software.

 

If there was a difference between the cost and the depreciable basis, because when it was put into rental status, the value was less than the cost, then you need to make an adjustment to the basis to get the proper amount of gain on the sale to flow through.

 

Tom

Newark, CA

[Terry D EA]

I agree with Tom completely.