rental was set up with $141,000 with $10,000 for land cost. $131,000 was depreciated basis. Rental was sold, how do i determine what percentage of the sales price to attribute to the land?

[Young-TP]

Rental was sold for $545,000. How do i figure what percent of that amount goes to the land?

[IRonMaN]

Why not just include it with the building?  I believe there is a question of the asset worksheet asking whether or not you want to include the land.

[Just-Lisa-Now-]

I always include it, but Ive seen many preparers say they break it out....is there really any difference? I often wonder if Im missing something by not breaking it out separate.

[TaxGuyBill]

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@Just-Lisa-Now- wrote:
I always include it, but Ive seen many preparers say they break it out....is there really any difference? I often wonder if Im missing something by not breaking it out separate.

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I don't think it is common, but in SOME cases it makes a difference, especially if the house was sold for less than the purchase price. (which is why the Instructions for 4797 say to break it up).

For example, let's say house was purchased for $400,000 ($300,000 building and $100,000 land) and took $60,000 of depreciation.

House sold for $360,000 ($270,000 building and $90,000 land).

Combined, you have $20,000 of Unrecaptured 1250 gain.

Breaking it up, house has $30,000 of Unrecaptured 1250 gain and $0 of 1231 gain.  Land has $10,000 1231 loss.  The 1231 loss creates that weird 1231 carryover.

There are probably better examples, but the difference primarily has to do with the 1231 gain/loss and carryover.

[Just-Lisa-Now-]

Im in CA, the chance of a property selling at a loss is slim to none, but I get what you're saying.

[rbynaker]

Around here it's all gains.  But hypothetically you might have a gain on the sale of the land and a loss on the sale of the building.  Around me the land values jump significantly each year.  Lots of tear-down and rebuild a McMansion going on.

I ask the client, they might have an appraisal that breaks down the values.  If not, I'll pull up the county assessment and ask if they believe it fairly represents the relative values of land and building and just use that percentage.

Rick