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Rental Property Cost Basis

Forum|Forum|2 years ago
August 31, 2023
3 replies
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Hello,

A client bought a property in 2007 for $300,000 and converted it to rental use in 2011. At that latter date, the home value had declined to $250,000. Accordingly, per IRS rules, the cost basis for the home was set at $250,000 and this value (less land cost) was depreciated.

Fast forward to 2022 -- the property was sold. How can I adjust ProSeries to reflect the $300,000 value as the actual cost basis for sale purposes, instead of the lower $250,000 entered onto the Asset Worksheet?

Thanks in advance.

ProSeries Basic

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Best answer by IRonMaN

I would just go into the asset entry worksheet and increase the cost to the higher amount. I would also increase land by the same amount as the cost increase so the software doesn’t mess around with adjusting depreciation.

IRonMaNAnswer

Level 15

I would just go into the asset entry worksheet and increase the cost to the higher amount. I would also increase land by the same amount as the cost increase so the software doesn’t mess around with adjusting depreciation.

Slava Ukraini!

J

JOFI

Author

Intuit Community Champion

That did the trick -- thank you!

IRonMaN

Level 15

You betcha!

Slava Ukraini!

T

TaxGuyBill

Level 15

@JOFI wrote:

Accordingly, per IRS rules, the cost basis for the home was set at $250,000 and this value (less land cost) was depreciated.

How can I adjust ProSeries to reflect the $300,000 value as the actual cost basis for sale purposes, instead of the lower $250,000 entered onto the Asset Worksheet?

No, the depreciable Basis is $250,000. The "cost" Basis is still $300,000.

Keep the depreciable Basis as it originally was ($250,000). Then in the Disposition section of the Asset Entry Worksheet, about 1/2 into that section there is a line that says "Asset gain (loss) basis, if different (enter 100% of basis)". Enter $300,000 on that line.

IRonMaN

Level 15

Six of one, half dozen of the other - what will that change on the 4797? 😁

Slava Ukraini!

T

TaxGuyBill

Level 15

@IRonMaN wrote:

Six of one, half dozen of the other - what will that change on the 4797? 😁

The Instructions for 4797 indicate that the land is supposed to be reported separately (which usually doesn't make any difference, but in certain circumstance it can affect things). If you report the land separately and change the Basis of the land (to make depreciation correct), it will make the land sale funky.

Plus, if there is already a spot on the worksheet for it, why do a work-around?

Plus, I prefer a half a dozen, rather than six. 😂

M

MICHAELMARS

Level 6

add a non-depreciable asset. same as what you do with 1031's

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