Installment Sale of residential rental

Forum|Forum|4 years ago
March 9, 2022
3 replies
49 views

Does client have to recapture all deprecation taken over the years in the year of the sale. If so how is that done? It’s not showing on 4797 or installment sale form.

ProSeries Professional

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Best answer by TaxGuyBill

As @taxiowa said, only "recapture" would be fully taxable in the first year of the Installment Sale.

For real estate (§1250 property), "recapture" is based on depreciation in EXCESS of Straight-Line depreciation. That would be extremely rare for a rental of a residential rental property.

The gain due to Straight-Line depreciation is "Unrecaptured Section 1250 Gain". That is NOT the same as "recapture". And "Unrecaptured Section 1250 Gain", is NOT fully taxable in the first year of the Installment Sale.

Because you only took Straight-Line depreciation, there is NOT any "recapture", so that is why it is not showing as fully taxable in the first year of the Installment Sale.

taxiowa

Level 8

I believe only section 1245 property is automatically recaptured (taxed) in year of installment sale. You have 1250 residential property sold which would be recaptured over life of installment agreement.

F

fredrAuthor

Level 5

thanks

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Norman2001

Level 6

I believe that §453(i) says that all the depreciation is recognized in the year of sale for both §1245 & §1250 assets.

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fredrAuthor

Level 5

when i do sale of rental house on asset entry work sheet and attach it to form 6252 it is not recapturing total depreciation taken over the years. If i have to report it in year of sale how is this done in pro series?

PATAX

Level 12

@fredr @TaxGuyBill @taxiowa @Norman2001 just make sure you enter all of the information on the correct worksheet and in the correct location. I give Pro Series credit, as they have always done an excellent job on this, and I usually have this every year. Just my opinion.

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