Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-02-2011, 04:38 AM
Junior Member
 
Join Date: Mar 2011
Posts: 6
Sale of Rental property formerly used as personal residence

Original business property was purchased in 1989, then sold and exchanged in 2004 for a rental property via a 1031 exchange. It was used as a rental for a few years, converted to a personal residence for over 2 years, converted back to a rental and finally sold in 2010. Property qualifies (meets the use/occupancy tests) for the 500K capital gains couple exclusion (with a small reduction via the new law for unqualified use post 2008). Total gain on the property was ~150K.

I have two questions:

First, for purposes of calculating the reduction in capital gains exclusion, would I use the original purchase date (1989) for the holding period because property was acquired via 1031 exchange or the date (2004) the replacement property was acquired?

Second, for purposes of reporting the sale, IRS says to use form 4797 because property was a rental at the time of sale, but when I do this Turbotax insists on racking up a huge AMT charge on top of the recapture/excluded gain tax. I also tried reporting the sale as a primary residence used part-time for rental use (what the IRS says to do if it was a residence at time of sale) which causes TT to only charge for the post-1997 recapture & post 2008 excluded gain tax, with no additional AMT tax.

I can't believe moving back into the property for 1 day before the sale would have allowed me to avoid a huge AMT bill. Am I missing something?

Thanks!!



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 03-18-2011, 04:11 PM
Junior Member
 
Join Date: Mar 2011
Posts: 6
Update - Holding period not relevant

Did some more research and determined the following as to question #1 (Holding period for reducing capital gains exclusion):

Since the home was used as a rental continuously from the time it was a personal residence until it was sold, there is no reduction in the capital gains exclusion. So the question as to which starting date to use (original purchase date or replacement property purchase date) is moot. Had we moved back into the property prior to the sale, the story would have been different...

Still haven't been able to figure out question #2, as to the AMT bill on sale of a rental property that was also used as a residence. Any ideas?

Thanks!



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
  #3 (permalink)  
Old 03-19-2011, 03:02 AM
Junior Member
 
Join Date: Mar 2011
Posts: 6
Answer for question #2

Found the solution for question #2 - Because TurboTax does not handle Form 4797 well, it requires that you first enter the sale info in "Enterable Form 4797". After that, you must override "Form 4797, p1", line 2, column g AND "Form 4797 AMT", line 2, column g with the section 121 exclusion amount. (Also write Section 121 exclusion in column A).

I had previously missed updating the AMT version of Form 4797 which resulted in the incorrect AMT bill. Turbo tax should really handle Form 4797, especially since it is the "Home & Business" version that they advertise "handles rental property business taxes".



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



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
What are the rules regarding the reporting of the Sale of a Personal Residence? TaxGuru Capital Gains 0 02-09-2011 11:24 AM
Property Rental conversion to Primary Residence and Back to Rental Property jgmeyer Rental Real-Estate 1 01-03-2011 08:47 AM
Would I be entitled to deduct a loss from the sale of my personal residence in 2010? Mandy Capital Gains 1 11-09-2010 08:45 PM
Sale of rental property -- results in TTax don't seem right dubois101277 Rental Real-Estate 1 02-07-2010 04:22 PM
How does a taxpayer report a loss on sale of a rental property on their tax return? TaxGuru Rental Real-Estate 0 09-15-2009 01:33 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
 
 
 

» Recent Tax Q&A
No Threads to Display.