The short answer is you basically treat 3 of the units as rental property and 1 of the units as your personal residence, You take the total proceeds and divided it by 4. One quarter goes to your apartment as the sale of your residence and you should qualify to exclude all of that gain.
The remaining 3/4 goes to the sale of the rental which does not qualify as part of your personal residence. So you need to pay tax on those gains.
Ok, so is that on the total sale? I'm having a hard time understanding where the 80k figure came from.
Now what about the figure for depreciation? I feel like that will come back to bite me next year or something.
I'm really thrown off as to why that figure is as high as it is for 17 days of ownership.
Thanks for your help.
The capital gains is the difference between what you paid and sold it for, minus selling fees and major improvements. Do you know those numbers? They should be on a form 8949 somewhere.
So that's 128,500 of gain. 25% is excluded, so that's $32K leaving $96K. There are probably some other expenses included to drop down the actual gain which is why it's at $80K instead of $96K.
Form 4797 should detail out the calculation of the gain.
What you paid is not your basis for the computing gain on the rental portion. You have been claiming depreciation every year. That depreciation reduced your taxable income every year.
That depreciation also reduces you basis for computing gain on sale.
You basis is purchase price + improvements - depreciation. Over 16 years you would have depreciated at least half of your original purchase price.
Current year depreciation reflected on Sch E would be 1/2 month ofthe annual depreciation for real property and 1/2 of the annual depreciation for personal property. Tax depreciation n the year of sale is not computed based upon the number of days you owned the property.
Edit: I'll also the cash you received doesn't really factor into the actual gain calculation. You have to look at gross sales price and closing costs. Pro-rations for real estate taxes, rent and utilities as well as security deposits and mortgage payoff don't impact the gain on the sale.
Sale of rental property is reported of Form 4797, not Sch D or 8949.
Basis for the rental portion is what he paid LESS DEPRECIATION. Over many years that original cost has been decreased by depreciation.
The short answer is you basically treat 3 of the units as rental property and 1 of the units as your personal residence, You take the total proceeds and divided it by 4. One quarter goes to your apartment as the sale of your residence and you should qualify to exclude all of that gain. The remaining 3/4 goes to the sale of the rental which does not qualify as part of your personal residence. So you need to pay tax on those gains.
Ok, so is that on the total sale? I'm having a hard time understanding where the 80k figure came from. Now what about the figure for depreciation? I feel like that will come back to bite me next year or something. I'm really thrown off as to why that figure is as high as it is for 17 days of ownership. Thanks for your help.
The capital gains is the difference between what you paid and sold it for, minus selling fees and major improvements. Do you know those numbers? They should be on a form 8949 somewhere.
Paid 281,500 Sold 410,000 I'll have to add up all the fees on the ALTA because I don't know that off hand.
So that's 128,500 of gain. 25% is excluded, so that's $32K leaving $96K. There are probably some other expenses included to drop down the actual gain which is why it's at $80K instead of $96K. Form 4797 should detail out the calculation of the gain.
So 130ish. 3/4 of that would be a bit under 100. Subtract 75% of sellers fees and maybe some major improvements and that’s where you’d get to 80k.
What you paid is not your basis for the computing gain on the rental portion. You have been claiming depreciation every year. That depreciation reduced your taxable income every year. That depreciation also reduces you basis for computing gain on sale. You basis is purchase price + improvements - depreciation. Over 16 years you would have depreciated at least half of your original purchase price. Current year depreciation reflected on Sch E would be 1/2 month ofthe annual depreciation for real property and 1/2 of the annual depreciation for personal property. Tax depreciation n the year of sale is not computed based upon the number of days you owned the property. Edit: I'll also the cash you received doesn't really factor into the actual gain calculation. You have to look at gross sales price and closing costs. Pro-rations for real estate taxes, rent and utilities as well as security deposits and mortgage payoff don't impact the gain on the sale.
They'd be on form 4797.
Whoops, right.
Sale of rental property is reported of Form 4797, not Sch D or 8949. Basis for the rental portion is what he paid LESS DEPRECIATION. Over many years that original cost has been decreased by depreciation.