Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-09-2014, 10:11 PM
Junior Member
 
Join Date: Mar 2014
Posts: 1
Exclamation Converted Rental Sold

I apologize for a somewhat lengthy post. I am having issues with figuring and properly recording the sale. (I'm trying to use TaxACT)

Scenario:
House bought in 2006 and used as primary residence. Converted to rental in August 2012, due to job transfer.

I established FMV of home for tax purposes and 2012 taxes were filed and depreciation taken for house and appliances.

Due to non paying tenants, I went delinquent on mortgage. Bank agreed to deed-in-lieu of foreclosure. Process completed 12/26/2013. Received 1099-A from bank showing sales price as the remaining mortgage amount due. The FMV on the 1099-A was about $2000 higher than the sales price, so there is no issue with taxable cancelled debt.

I have completed the entries for income and expenses (Sch E), and depreciation (form 4562) for this tax year.

Now I am entering the information for form 4797, part III. I am entering information separately for house, land, and appliances. I am using the basis, depreciation allowed, and sales price from 1099-A.

Questions:

1. The appliances went with the house. Do I state the sales price was zero for their disposal? If not, how is it recorded?

2. How do I exempt the gain shown for the house and land (since it was primary residence)? The calculation on the 4797 shows the gain to be the depreciation + the amount of sale over the basis. I know I will have to pay taxes on the depreciation claimed for 2012 and 2013. I just can't figure out where to exempt the gain resulting from the sales price minus the basis.

I'm sure I will have more questions. Thanks in advance for any help.

-Bob



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-10-2014, 01:33 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,236
Quote:
Originally Posted by rdh2 View Post

#1;House bought in 2006 and used as primary residence. Converted to rental in August 2012, due to job transfer.
I established FMV of home for tax purposes and 2012 taxes were filed and depreciation taken for house and appliances.




#2;Due to non paying tenants, I went delinquent on mortgage. Bank agreed to deed-in-lieu of foreclosure. Process completed 12/26/2013. Received 1099-A from bank showing sales price as the remaining mortgage amount due. The FMV on the 1099-A was about $2000 higher than the sales price, so there is no issue with taxable cancelled debt.

I have completed the entries for income and expenses (Sch E), and depreciation (form 4562) for this tax year.

Now I am entering the information for form 4797, part III. I am entering information separately for house, land, and appliances. I am using the basis, depreciation allowed, and sales price from 1099-A.

#3;Questions:
1. The appliances went with the house. Do I state the sales price was zero for their disposal? If not, how is it recorded?




#4;2. How do I exempt the gain shown for the house and land (since it was primary residence)?



#5;The calculation on the 4797 shows the gain to be the depreciation + the amount of sale over the basis. I know I will have to pay taxes on the depreciation claimed for 2012 and 2013. I just can't figure out where to exempt the gain resulting from the sales price minus the basis.

I'm sure I will have more questions. Thanks in advance for any help.

-Bob
#1; aslongas you purchase the appliances for your rental property, thety can be depreciated for five years. You begin depreciating in the year in which the appliances were purchased and placed in service. Your purchase price in the beginning year is your cost basis. You are allowed to depreciate the full cost of the appliances in the five years you have them in service at your rental property;in the case of used appliances , they can be depreciated the same way as new appliances. Your cost basis is what you paid for it, not what it was worth new. You still get five years to depreciate it, until you recover the purchase price fully. If you purchase them and take them out of service in the same year, you cannot depreciate it. In such a case, you would write them off as an expense for the current year.




#2;foreclosed primary-residence homeowners are exempt from declaring as income the difference between the outstanding loan balance and the subsequent sale price. The same is not true for foreclosed rental properties, whose owners may have to report the difference in those values as a capital gain. The 1099-A is issued by the lender and will show the loan balance and the subsequent sales price of the foreclosed home. As mentinoned previously, The Mortgage Debt Relief Act generally exempts any cancelled or forgiven debt on a principal residence from consideration as income, up to a maximum of $2 million. The same exemption doesn't apply to investment properties, except under special circumstances, including bankruptcy or insolvency. You may be liable for capital gains tax on the difference between the loan balance and the eventual sale price of the home; both values are shown on Form 1099-A.


.


#3;I guess you need to recapture the unrecaptured depre taken on the rental pty up to the amount of your LTCG , $2K,shown on 1099A since you have LTCG.

#4;as said, foreclosed primary-residence homeowners are exempt from declaring as income the difference between the outstanding loan balance and the subsequent sale price. The same is not true for foreclosed rental properties, whose owners may have to report the difference in those values as a capital gain..


#5;As mentioned above; Correct;9i guess aslongas you have gain of $2K and the gain’d be taxed as ordinary gain taxed at 25% aslongas your marginal tax rate is 25% or higher.You need to recapture the unrecapture sec 1250 gain LESS you have NOL/PAL c/f bigger than the gain of $2K.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Converted rental to primary home mytaxes2013 Rental Real-Estate 1 02-18-2014 02:45 AM
Rental property converted to second home bukaspop Itemized Deductions 1 02-16-2014 10:23 AM
Rental converted to primary -how to handle loss on sale Kingfasi Rental Real-Estate 0 04-10-2012 11:11 PM
Capital Losses of Home Converted into Rental Property garllh Rental Real-Estate 4 07-20-2011 01:29 PM
Can Suspended Losses from Rental Property converted to Personal Residence be released upon sale of another rental property? mountainaire Rental Real-Estate 1 04-05-2011 03:59 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning