Capital Improvements year of sale of rental property

Forum|Forum|2 years ago
March 19, 2024
4 replies
25 views

To report capital improvements that were made the same year of sale of the rental property. Is it proper to enter them as a separate asset and report them as sold for $0? This would be a short term loss to offset the long term gain on the sale. Should they be a selling expense? Or simply an adjustment to basis?

ProSeries Basic

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Best answer by sjrcpa

I'd make it an adjustment to basis.

Others disagree with me, but I report the whole shebang as one sale. In my view, they did not separately sell land, building, improvement and appliances.

dkh

Level 15

If the improvements were done so the property could be sold, I would enter as a selling expense.

If improvements were done and property was still rented prior to being sold, I would enter a separate asset and allocate a portion of sale price.

dascpa

Level 11

I agree with the above except - if I installed a heat pump for example for $10,000 before the sale and then sell the house with a gain, did the heat pump REALLY appreciate to $11,000 at time of sale. In the end it may or may not matter mathematically but appreciation apportioned across the board may not be logical in all circumstances.

sjrcpaAnswer

Level 15

I'd make it an adjustment to basis.

Others disagree with me, but I report the whole shebang as one sale. In my view, they did not separately sell land, building, improvement and appliances.

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

IRonMaN

Level 15

Yup, me too. I have never seen a purchase agreement breakout the sale for 48 door knobs $22, furnace $666, roof $4999, etc, etc. They bought the whole shooting match for one price so I am not wasting my time breaking it out into 120 portions.

Slava Ukraini!

T

TaxGuyBill

Level 15

@IRonMaN wrote:

Yup, me too. I have never seen a purchase agreement breakout the sale for 48 door knobs $22, furnace $666, roof $4999, etc, etc. They bought the whole shooting match for one price so I am not wasting my time breaking it out into 120 portions.

How do you enter it in ProSeries? Do you enter it directly on the 4797?