Disposition of Rental Property - 1099-S Received

[Yardley CPA]

Client sold rental property in which she had a 33.34% ownership along with her two brothers for $300,000 selling price.   Each of the three owners received a 1099-S in the amount of $100,000.   I entered all the information: date of disposition, sale price and expense of disposition on the fixed asset screen and then chose to  "force" the information to Form 4797 part 1, Long Term.  The 4797 shows the $100,000 Gross Sales Price.  Is this the only location on the 1040 that the 1099-S sales price needs to be reflected?  I assume when the IRS sees it here, it sill be a "match" and there is no other location on the return that it needs to be reflected?

[Pacun]

I think you will to use Sch D but before that need to enter the basis of the property. Don't forget to include 1/3 of the land that was not depreciated.

[Yardley CPA]

As I completed the return and hit the "Check Return" tab in ATX, I was alerted to include the amount I received from any 1099-S on line 1 of the 4797.  Kudos to ATX for alerting me to that.  I think this is all I need to do and nothing needs to flow to Schedule D, but I'm not 100% on that.

 

[grandmabee]

I would break out land  for part 1 and put house on part 3.

[Yardley CPA]

51 minutes ago, grandmabee said:

I would break out land  for part 1 and put house on part 3.

Grandmabee...what would be the entry for each Section?  Land is worth $30,000 (three beneficiaries share the rental).  So I assume Section 1 would reflect the same dates...what would be the Gross Sales Price?  I assume the cost is $10,000?  

[jklcpa]

I prorate the sale proceeds between building and land based on the same percentages they bear to total cost basis. If any furniture, fixtures, appliances were on the depreciation schedule, you have to deal with those too.

[Yardley CPA]

Would it be unusual to have a gain on the land portion?  I wouldn't think so, but want to make sure.   

[jklcpa]

Not unusual at all.  Be sure to allocate a portion of the selling expenses to each component included in the sale.

[Yardley CPA]

Thank you all who chimed in.  Very much appreciate it. 

The total sales price was $300,000.  Each of the three beneficiaries received a 1099-S for $100,000.  Part 1 of the 4797 has a Gross Sales Price of $13,000 and Part 3 reflects a Gross Sales Price of $87,000.  Combining them gives you the $100,000 and that is what the IRS is looking for, correct?

So Part 1 of the 4797 should reflect the sale of the land based on a pro-rata calculation of the percentage of land versus building.  In my case it looks like this:

 

Part 3 should reflect the sale of the sale of the building: