Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

Report Rental property sale - as Bulk sale v. report Improvement seperately

Highlighted
Level 3

Hi,

Did any had do that?

reporting a rental sale at a gain. According to PCO instruction, entered each asset assocaited to the property as bulk sales (multi-assets), but got an error message as below: 

#3 has a depreciation recapture method (1245, 1250, etc.) that differs from the main asset of the bulk sale in which it is included. For the depreciation recapture to be correctly reported on Form 4797, this asset should be input as a separate sale.

 

(Asset #1. Land,  Asset # 2. Building  - depreciated over 27.5,  Asset# 3. Improvement kitchen - deprecioated over 7 years and took bonus depreciation)

What I have done:

report Asset #3 seperately not as part of Bulk sales asset, then only allocate portion sales proceeds (equal to adjusted basis), so no gain or loss on form 4797 page 1 Part I

 

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
Highlighted
Level 15

Provided the kitchen improvement is a §1245 property (rather than §1250 judging by the recovery period), the sale would need to be recorded separately in PTO with a portion of the sale proceeds allocated to it so that §1245 recapture, if any, may be computed separately from any unrecaptured §1250.  While §1245 does not require depreciation recapture to be computed on the acceleration, you should determine with your client whether no gain was indeed attributable to the improvement.

Assuming the kitchen improvement is for a residential rental, 5 years instead of 7 should be the recovery period.

---------------------------------------------------------------------------------
Still an AllStar

View solution in original post

1 Reply 1
Highlighted
Level 15

Provided the kitchen improvement is a §1245 property (rather than §1250 judging by the recovery period), the sale would need to be recorded separately in PTO with a portion of the sale proceeds allocated to it so that §1245 recapture, if any, may be computed separately from any unrecaptured §1250.  While §1245 does not require depreciation recapture to be computed on the acceleration, you should determine with your client whether no gain was indeed attributable to the improvement.

Assuming the kitchen improvement is for a residential rental, 5 years instead of 7 should be the recovery period.

---------------------------------------------------------------------------------
Still an AllStar

View solution in original post