Question

How do you report appliances still in service on sale of rental property

Forum|Forum|2 years ago
March 3, 2024
2 replies
0 views

On form 4797 I understand how to enter the sales price, cost, depreciation and arrive at the adjusted basis.

My question is how do you report and enter the data for appliances that have not fully depreciated.

I have 2 appliances with depreciation taken of $840.81, and deprecation not taken of $143.61.

Is the depreciated amount of $840.81 added to the total deprecation taken or allowed on the rental property sale, and the $143.61 depreciation not taken added to the basis as an expense.

How do you report this on form 4797.

Can you report this on line 25 as section 1250 property showing deprecation allowed as $840.81.

Appreciate your help on this.

J

JamesG1

If the residential rental has been sold and you are currently depreciating one or more appliances within the residential rental, the appliance(s) will be recorded as sold and the selling price allocated across the appliance(s) cost.

The sale of the appliances and any depreciation recapture will be reported on IRS form 4797. See IRS form 4797 Part III.

As an example, the residential rental and appliance was purchased for $111,000 and the selling price of $222,000 is allocated across the land, the structure and the appliance.

Purchase Sales price

Residence 100,000 200,000

Land 10,000 20,000

Appliance 1,0000 2,000

Total 111,000 222,000

The appliance is reported as sold at the screen Tell us more about this rental asset within the rental property asset screens.

Note: Sale of land reported on IRS form 4797 Part I, page 1.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

D

DanTzAuthor

The form for line 1b says to enter the total amount from lines 2, 10 and 24 due to partial dispositions of MACRS assets.

On line 2 I show a gain for the land for a rental property with no depreciation taken on the land.

I have zero for line 10 and on line 4 I have a gain after adjusting for deprecation taken for a rental.

If for example I have 20,000 for land gain and $80,000 for rental property gain what is supposed to be entered on 1b.

Is the amount be entered only the $80,000 for the rental property that had depreciation taken.

Appreciate a response to this message.

D

DanTzAuthor

Can you please provide an example of how to report the land portion of the rental property sale on Part 1 of IRS form 4797.

Appreciate the help with this being further explained.

J

JamesG1

Land is section 1231 property and is reported in Part I of the IRS form 4797.

The residential rental is section 1250 property and reported in Part III of the IRS form 4797.

The appliance is personal property used for business purposes and is section 1245 property reported in Part III of the IRS form 4797.

Further explanation may be found at IRS Publication 544 here.

@DanTz

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

D

DianeW777

Community, still looking for assistance on this subject.

The last reply was from DianeW777 on this thread.

By selling expenses you are referring to real estate commission and closing costs.

These should also be allocated to residence, land and appliances in the same percentage allocation.

Is this correct?

The $143.61 that was not fully depreciated from the appliances.

Is this added to the basis of the rental property or how is this treated?

Since both appliances are in the 4th and 5th year of depreciation could they be recorded as seen in the example below.

Example:

Appliance is the actual cost of the appliance when purchased.

The gross sales price is the remaining amount of the appliance that has not been depreciated.

Gross sales price $101.57

Cost of appliance $767.93

Depreciation taken $666.36.

Adjusted basis $101.57

Total gain would be zero.

Appreciate your help with this.

Yes, the allocation should involve all assets unless, appliances as example, do not have any real value which would be determined by the age of the appliance.

Your example is accurate and the process is explained below as well.

The amount of any depreciation remaining on any depreciable asset that is part of the sale would essentially be considered as basis when you enter the sales information. TurboTax will easily handle this part for you and carry over to Form 4797 the correct gain. You should see the total cost, less depreciation, and then the selling price/selling expenses will be used against the remaining cost basis to arrive at the actual gain or loss.

@DanTz

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"