How to keep a depreciation entry without computing depreciation?

[puravidapto]

A taxpayer converted a rental to primary home from 1/1/2019 and then sold his home in 2022. I would like to create a depreciation entry and complete home sale from there. The problem is if it creates a current year depreciation (even I put the disposition date rental stop date 12/31/2018, it computes depreciation as if date were 12/31/2022, i.e. it ignores the year). 

My workaround is to put the cost basis as 0, but I do not like it as the information is lost. What would you do for this situation? Thanks.

[TaxGuyBill]

I don't use ProConnect, so maybe I'm wrong, but ... why are you wanting to enter the sale on a depreciation screen?

You are reporting the sale of a Principal Residence (on Form 8949/Schedule D), but it seems like you are saying you want to report it as a rental (which might incorrectly go to 4797, but as I said, I don't use ProConnect).  Why not just report it as a Principal Residence?

As a side note, if you are claiming the §121 exclusion, it looks like your client has "Nonqualified Use", so don't forget to report it that way.

[George4Tacks]

You can enter just the sale date in depreciation, but do not enter a sales price. That will give you a depreciation schedule for the current year. You can then use that information to do the sale of home in the disposition screen (enter the depreciation amount there.)

[puravidapto]

@TaxGuyBill Thanks so much for your reply! Yes, I can either start from depreciation screen and the sale is reported on form 4797, or I can start from capital gain screen and the result goes to Schedule D. The result is the same.

My questions are:

1 - When a rental was converted to primary home, it is reported on Schedule D? When a primary home converted to rental, it is reported on form 4797?

2 - In your software, can you stop depreciation but still keep the depreciation entry in the software? The information is needed when you sell the home, or otherwise you may need to go back many years to look for the information. 

3 - In a earlier post, https://proconnect.intuit.com/community/proconnect-tax-discussions/discussion/rental-property-sale-w... , we said we should report the land and building separately, how do I allocate Sec 121 exclusion between land and building? 

[puravidapto]

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@George4Tacks wrote:

You can enter just the sale date in depreciation, but do not enter a sales price. That will give you a depreciation schedule for the current year. You can then use that information to do the sale of home in the disposition screen (enter the depreciation amount there.)

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As long as you have a depreciation entry, no matter what date you put in, it could be a date many years ago, with or without an amount, it will generate a depreciation amount which I do not need, because it ceased to be rental home anymore. 

[TaxGuyBill]

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@puravidapto wrote:

1 - When a rental was converted to primary home, it is reported on Schedule D? When a primary home converted to rental, it is reported on form 4797?

2 - In your software, can you stop depreciation but still keep the depreciation entry in the software? The information is needed when you sell the home, or otherwise you may need to go back many years to look for the information. 

3 - In a earlier post, https://proconnect.intuit.com/community/proconnect-tax-discussions/discussion/rental-property-sale-w... , we said we should report the land and building separately, how do I allocate Sec 121 exclusion between land and building? 

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1) It is based on what the property was used for in the year of the sale.  In your case, it was a personal residence, so it is reported on 8949/Schedule D.

2) No.  I either need to make a note (either in the client file or in the software), or look up the pertinent information when the property is sold.

3) It is being reported on 8949, so I think the entire property (building and land) should be reported together as one item.  If it was on 4797, would there be a taxable gain (not including the gain due to depreciation)?  If not, you would just eliminate all of the gain, except depreciation.

[George4Tacks]

Here are the how to for ProConnect Tax Online:

This covers most all of the possibilities.

https://proconnect.intuit.com/support/en-us/help-article/form-8949/reporting-sale-home-individual-re...

For home used as rental:

https://proconnect.intuit.com/support/en-us/help-article/form-8949/reporting-sale-home-used-rental-p...