How to report sale of residential rental property in a trust

Forum|Forum|5 years ago
May 8, 2021
1 reply
18 views

I have a trust which owned a residential rental property which was sold in 2020. When I enter the details, the program is calculating capital gain after deducting depreciation taken from the basis - and then also calculating depreciation recapture. This seems like a double whammy to me. So am I entering something wrong or is this correct?

Lacerte Tax

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sjrcpa

Level 15

That's correct. Gain to the extent of depreciation is potentially taxed at a higher rate than the rest of the gain.

The more I know the more I don’t know.

T

TaxmasterAuthor

Level 3

After doing some further research, I don't believe it is correct that there should be capital gain tax on the basis after deducting depreciation - and also depreciation recapture. What I can't figure out is how to enter the data so that the software calculates this correctly. Any suggestions?

sjrcpa

Level 15

Research some more.

Gain = Sale price -expenses of sale-adjusted basis.

Adjusted basis = Cost + improvements - accumulated depreciation.

Gain to the extent of depreciation = unrecaptured 1250 gain. The rest of the gain = 1231 gain.

The more I know the more I don’t know.

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