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Old 03-01-2013, 02:01 PM
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Join Date: Feb 2013
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Sale of second home

We sold our cottage over this summer at a profit. It was purchased in 1999. This cottage was rented out yearly to others, but used more than the 10% or 14 days limit. Expenses and depreciation were allocated using the tax court method on Schedule E. I have all records. I need some additional guidance on the items below, and haven't found any specific examples on the IRS website:

1. Although (I think) the property is a residence, I believe that the gain has to be reported as a section 1250 on form 4797 to recapture the depreciation and tax it at a higher rate. Is this correct? (or not, see next question)
2. Per a TurboTax Help box that I've just found, I'm supposed to enter the business portion on 4797 by calculating the average business use (~70%) and entering that portion on the 4797, and the balance on schedule D. If the property cost basis were $100K, and the sale price $300K, do I report $70K, and $210K on the 4797 and the balance ($30K and $90K) on Schedule D? Ignoring the depreciation (which goes on the 4797 no matter what), both would be LT gains and my net tax would be the same- I don't see the point.
3. Would an upgrade to Premier TurboTax cover the calculations above for me? I can do them manually, just worrying about missing a small detail.
4. Over the years a number of 5 year life items have been depreciated to zero, and were sold with the cottage. Do these have any effect of the capital gain calculation?
5. I have several 5 year life items part way thru depreciation that were sold with the cottage. Same business/personal split as above. No discrete line items of cost were in the sales contract. Total value was ~$700 and there's been a total of $190 in depreciation taken. What do I need to do?
6. Info-
TurboTax has data on 4797 P1 line 1 (1099S), 6 & 7 (gain), 9a (gain to Schedule D line 11), Page 2 line 19A (date of ownership/sale), 20 (gross sale price), 21 (adjusted cost basis), 22 (depreciation taken), 23 (adjusted basis), 24 (total gain), 26g (0), 30 (total gain), 31 (0), 32 & 32b (gain). Also completed was an uncaptured 1250 gain worksheet. The result was a 15% gain on the appreciation and a 25% tax on the depreciation calculated by the Schedule D worksheet on lines 21 through 25.



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