What form(s) do we need to fill out to report the sale of rental property?
The gain or loss on the sale of rental property is reported on Form 4797, Sale of Business Property.
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We are selling rental property and have never claimed depreciation. What do we do about this when we file our taxes?
When reporting the sale of rental property, you are required to make an adjustment to your basis for allowable depreciation regardless to whether or not it was taken. For more information refer to Publication 544, Sale or Other Dispositions of Assets, and the Instructions for Form 4797, Sales of Business Property.
You may want to amend your income tax returns using Form 1040X, Amended U.S. Individual Income Tax Return. However, you may only amend your return three years from the later of the due date of the return or the date the return was filed.
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I am selling my rental property and was asked to pay the buyer's closing costs. Is all or part of the costs deductible for me?
In computing your gain or loss on the sale, reduce your proceeds from the sale by your selling expenses, including the buyer's closing costs that you agree to pay. Refer to Publication 544, Sales and Other Dispositions of Assets, for additional information.
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How do I file the gain on an installment sale of business property in each year? What form do I use?
Use Form 6252, Installment Sale Income, to figure your installment sale income each year. You may also need Form 1040, SCHEDULE D, Capital Gains and Losses and Form 4797, Sales of Business Property. For additional information including forms and instructions, refer to Publication 537, Installment Sales
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What forms do we file to report a loss on the sale of a rental property?
The gain or loss on the sale of rental property is reported on Form 4797, Sale of Business Property.
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I sold a rental property in which I had previous years' loss carryovers due to the loss limitation rules. Can I recover the total carryover since the property has been disposed of?
Yes. Claim the expenses limited for that property in prior years on Form 1040, SCHEDULE E, Supplemental Income and Loss.
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Can you sell rental property and reinvest it into rental property without paying capital gains tax?
Unless you exchange properties in a qualifying like-kind exchange, you may not defer the gain on the sale of your rental property by purchasing replacement property. For additional information on like-kind exchanges, refer to Publication 544, Sales and Other Dispositions of Assets.
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I have heard that I can sell my rental property and use the proceeds to purchase rental property of greater value and the transaction is viewed just like an exchange in that the tax is deferred until the new property is sold. Is this true?
What you have heard about is a like-kind exchange. Like-kind exchanges are subject to several rules and restrictions listed in Publication 544, Sales and Other Dispositions of Assets.
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We sold a rental property last year and used the 1031 Tax Deferred Exchange law to defer the gains into another like-kind property. How do I handle this transaction on my tax return?
Report the exchange of like-kind property on Form 8824, Like-Kind Exchanges. The instructions for the form explain how to report the details of the exchange. Report the exchange even though no gain or loss is recognized.
If you have any taxable gain because you received money or unlike property, report it on Form 4797, Sales of Business Property, and Form 1040, SCHEDULE D, Capital Gains and Losses. Refer to Publication 544, Sales and Other Dispositions of Assets, which has a detailed section on like-kind exchanges.
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Can we move into our rental property, live there as our main home for two years, and sell it without having to pay capital gains tax?
You may be able to exclude your gain from the sale of a home that you have also used for business or to produce rental income if you meet the ownership and use tests.
However, if you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. (Note: If you can show by adequate records or other evidence that the depreciation deduction allowed was less than the amount allowable, the amount you cannot exclude is the smaller of these two figures.)
The gain, exclusion, and depreciation recapture should be reported on Form 1040, SCHEDULE D, Capital Gains or Losses, as described in Publication 523, Selling Your Home.
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I just sold a commercial rental property my wife and I had purchased thirty years ago before she passed away and I want to know how to figure my cost basis. Is it the full appraised value at the time of her death, or is it just half?
The answer depends on which state you live in. The basis of property you inherit is usually the fair market value at the date of the decedent's death. If you live in a community property state, the basis for the entire property becomes the fair market value at the date of death. If you are in a non-community property state, the one-half that your wife owned would be increased to the fair market value at the date of her death. The basis in the one-half that you owned would remain at your original one-half cost.
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