Discussion:Princ. Res Exclusion-Separate Rental
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Discussion Forum Index --> Tax Questions --> Princ. Res Exclusion-Separate Rental
| 21 March 2007 | |
| Taxpayer sold his principle residence - qualifies for exclusion and did not receive a 1099. Along with the residence, he also sold a rental house trailer. The sales price was not allocated between the properties. If I allocate FMV to the trailer, then I create a loss for the 4797.
Can I simply ignore the sale of the rental property? The value assigned to it will be an estimate, the loss will be minimal, and the taxpayer is very conservative. Thanks in advance. | |
| 21 March 2007 | |
| Is this a stupid question, or just not very interesting? Have done a search here as well as on the IRS web site, and have not come up with a clear, practical answer on this. | |
| 21 March 2007 | |
| Your scenario is unclear. I'll restate it and answer it that way. Advise if the scenario is incorrect.
It sounds like the trailer is located on the lot where the house is located (the one sold) and that everything was sold in one transaction. Therefore, the selling price of the trailer is "buried" in the sellng price of the home, land and trailer. Because the trailer was rented, it is a separate entity for tax reporting. The problem is determining the selling price of the trailer since it wasn't spelled out. My suggestion: Show the trailer as being sold for its adjusted basis (Form 4797). That way you will disclose the sale and at the same time show no gain or loss. This covers the disclosure issue and also avoids a taxable gain. Since I assume you are using ProSeries and have been reporting the trailer's depreciation on Schedule E, you can handle the sale through the Asset Entry Worksheet. | |
| 21 March 2007 | |
| He must have been (should have been) reporting the rental on Sch E including depreciation. Report it on 4797. | |
| 21 March 2007 | |
| Thanks for the help.
Your scenario is correct, I apologize for not being clear. Yes, this was a Scedule E rental, with (loss) flowing to the 4797. Will do the adjusted basis as the sales price. Must have been an airhead moment not to figure it out myself. Appreciate being able to get advice - even on issues that should be simple. | |
| 21 March 2007 | |
| You say he sold the rental house trailer...was it specifically included in the PA as being sold along with the property? Don't those things have titles? Was the title transferred to the buyer? Is sales tax required to be paid on the transfer of such a trailer? If sales tax was paid, there's evidence of your value (or at least you can deduce it). If not, could it have been abandoned?
I don't believe it's aggressive to allocate fmv to the trailer. If it was a bargain purchase, you may have to proportionally allocate the sales price amongst the real property and the trailer. I don't see any authority for just using adjusted tax basis. ...my two cents. | |
| 21 March 2007 | |
| Sale was of principal residence w/ 20 acres and a rental house trailer. Total sales price for all was $250K. One settlement sheet - nothing allocated. Property is in Paradise Valley, MT, where comparable land is selling for $10,000-$20,000 per acre. Home was a modular - nothing fancy. Rental trailer was a dive - a sled dog trainer lived in it, with 30 dogs outside in kennels (i.e. Iditarod type dogs).
Montana does not have sales tax so no help there. Cannot possibly see a gain on the trailer-15 years old - $1500 purchase price. Basis now is $5306 with improvements including sewer. Again, taxpayer is conservative, and without better numbers I am not comfortable reporting a loss. Taxpayer is elderly gentleman who thinks I am a genius for telling him he doesn't owe taxes on the sale of his home, even though we discussed it last year. | |
