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#1
04-08-2004, 07:05 PM
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 Re: Sale of rental property converted from personal use Michael I. Holzman wrote: - quote - > "Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
Sorry about the delay. I thought the override was on> > No gain or loss, if you've done the calculations correctly. > > The basis for gain is $123,000 (adjusted for depreciation > > and additions after purchase), and the basis for loss is > > $76,000 (adjusted for depreciation and additions after > > conversion). > I came to the same conclusion since my first post after > reading IRS Pub. 544. I also discovered that TurboTax > doesn't seem to address this situation. > Based on my discussion with TurboTax support, they said I > had to manipulate the basis manually so that the program > would calculate a zero loss. Does this make sense? What > would be the proper way to fill out Form 4797 in this > situation? > Enter both the land and building as separate assets in Part > I? TurboTax put the land in Part I and the building in Part > III. > The instructions for Form 4797 aren't much help here either. Schedule D, rather than on form 4797. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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04-02-2004, 10:59 PM
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| Re: Sale of rental property converted from personal use "Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote: - quote - > Michael I. Holzman wrote:
I came to the same conclusion since my first post after> > Background: I bought real estate in 1988 for $123,000 and > > used if for personal use until 1994 when I moved to another > > residence. Since the real estate market in my area had > > plummeted I decided to convert the personal use on the > > original property to a rental at that time. I rented it > > from 1994 to 2003, when I sold it for $100,000. When the > > property was placed into rental use in 1994, following > > Schedule E guidance, I had the property appraised at $76,000 > > (building + land) to establish the basis for depreciation. > > Since the 1994 appraised value (fair market value or FMV) > > was less than the adusted basis ($123,000), the FMV became > > the basis for depreciating the property. The total allowed > > depreciation between 1994 and 2003 was $17,822. > > > My question is what basis should be used for figuring out a > > loss or gain from the sale of the property. If I use the > > 1994 FMV of $76,000, I calculate a gain of $41,822 ($100,000 > > - ($76,000 - $17,822)). If I use the original adjusted cost > > basis of $123,000, I calculate a loss of $5,118 ($100,000 - > > ($123,000 - $17,882)). The first method doesn't make sense > > as the true cost basis was $123,000, not $76,000. I would > > appreciate if someone would confirm that the second method, > > using the adjusted cost basis is the correct method for > > determining a loss in this case. Thank you. > No gain or loss, if you've done the calculations correctly. > The basis for gain is $123,000 (adjusted for depreciation > and additions after purchase), and the basis for loss is > $76,000 (adjusted for depreciation and additions after > conversion). reading IRS Pub. 544. I also discovered that TurboTax doesn't seem to address this situation. Based on my discussion with TurboTax support, they said I had to manipulate the basis manually so that the program would calculate a zero loss. Does this make sense? What would be the proper way to fill out Form 4797 in this situation? Enter both the land and building as separate assets in Part I? TurboTax put the land in Part I and the building in Part III. The instructions for Form 4797 aren't much help here either. Thanks for your help. << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#-1
04-01-2004, 12:50 PM
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| Re: Sale of rental property converted from personal use Michael I. Holzman wrote: - quote - > Background: I bought real estate in 1988 for $123,000 and
No gain or loss, if you've done the calculations correctly.> used if for personal use until 1994 when I moved to another > residence. Since the real estate market in my area had > plummeted I decided to convert the personal use on the > original property to a rental at that time. I rented it > from 1994 to 2003, when I sold it for $100,000. When the > property was placed into rental use in 1994, following > Schedule E guidance, I had the property appraised at $76,000 > (building + land) to establish the basis for depreciation. > Since the 1994 appraised value (fair market value or FMV) > was less than the adusted basis ($123,000), the FMV became > the basis for depreciating the property. The total allowed > depreciation between 1994 and 2003 was $17,822. > My question is what basis should be used for figuring out a > loss or gain from the sale of the property. If I use the > 1994 FMV of $76,000, I calculate a gain of $41,822 ($100,000 > - ($76,000 - $17,822)). If I use the original adjusted cost > basis of $123,000, I calculate a loss of $5,118 ($100,000 - > ($123,000 - $17,882)). The first method doesn't make sense > as the true cost basis was $123,000, not $76,000. I would > appreciate if someone would confirm that the second method, > using the adjusted cost basis is the correct method for > determining a loss in this case. Thank you. The basis for gain is $123,000 (adjusted for depreciation and additions after purchase), and the basis for loss is $76,000 (adjusted for depreciation and additions after conversion). << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
| Tags |
| converted, personal, property, rental, sale |
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