sale of a rental by an armed forces member

[Young-TP]

Where do I enter on the asset entry worksheet that the rental was sold by a member of the armed forces? I completed the Home Sale worksheet and the sale is a loss so no use of the exclusion, but I can't link the asset entry worksheet to the home sale worksheet because of the loss. Is the only gain the depreciation they were allowed?  They also sold their main home, do I do a separate home sale worksheet for the sale of that home? I just don't see anywhere it asks if they were members of the armed forces. Thanks

[sjrcpa]

Military don't get any special treatment on the sale of a rental property. It should not be linked to the home sale worksheet. If sold at a loss there is no gain attributable to depreciation.

For sale of their main home, do they need the extra time allowed for military personnel? If not, ignore it. If yes, one of the ProSeries users should be along to answer where the input is.

[TaxGuyBill]

As Susan mentioned, can you clarify why you think being a member of the armed forces affects these situations?

[Young-TP]

Maybe I didn't ask the question right. Do I need to complete the home sale worksheet and the asset entry worksheet when selling rental property for someone in the military. If SL depreciation was used do they report that as a capital gain and if so where is does that figure come from?

This is the exclusion for military. The second rule when selling a rental property is the military extension of the capital gains exclusion. This allows active-duty military members who are away from their property due to PCS orders to extend the 60-month period up to an additional 10 years. This means that eligible military members may exclude their capital gains as long as they occupied the primary residence for two of the previous 15 years.

[sjrcpa]

Is it a rental property or a personal residence?

Is there one property sale or two?

How long were they away from their personal residence due to military orders?

I'm so confused.

[Young-TP]

You're confused?? I'm so confused.

Purchased June 2009 as a personal residence. Turned into a rental November 2011. Has been a rental until sale 2-4-22. Been stationed at multiple  places, decided to sell the rental. There is a loss on the rental. I completed the asset entry worksheet, and the home sale worksheet.  Home sale worksheet is a loss so the asset entry worksheet will not let me link it. I guess my biggest question is will they be recapturing the depreciation taken? SL was used. I thought losses did not have to recapture depreciation.

Any help would be greatly appreciated. thanks

PS. They also sold their main home in another state but I can handle that one. surprise..

[sjrcpa]

Rental sold at a loss = no depreciation recapture. End of story.

The fact that it was at one time a personal residence or that they are in the military is irrelevant.

I don't know ProSeries and its worksheets but I think you're trying to overcomplicate this.

You can only have one personal residence at a time, and you said that is a different property; it was sold, and you have handled that.

EDIT: How do you lose money when selling property purchased in 2009, depreciated since 2011, and sold in 2022?

[Young-TP]

Thank you. Even though the sale was a loss (and I believe that is because if the area, and it being a military town, IDK) proseries is still taxing them on the depreciation recapture. I may need to get proseries help with that.  Fresh eyes this morning helped a lot. appreciate your help. 

[qbteachmt]

"The fact that it was at one time a personal residence or that they are in the military is irrelevant."

I think this is the pertinent detail: "This allows active-duty military members who are away from their property due to PCS orders to extend the 60-month period up to an additional 10 years. This means that eligible military members may exclude their capital gains as long as they occupied the primary residence for two of the previous 15 years."

https://www.militaryonesource.mil/financial-legal/taxes/income-tax-and-rental-properties-when-milita...

"They also sold their main home in another state but I can handle that one. surprise"

Are you aware if the military has a provision which allows more than one primary personal residence exemption for capital gains exclusion in the same tax year? Otherwise, you don't get both.

[TaxGuyBill]

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@Young-TP wrote:

Thank you. Even though the sale was a loss (and I believe that is because if the area, and it being a military town, IDK) proseries is still taxing them on the depreciation recapture.

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It sounds like it was sold for less than the original purchase price, but for more then its Adjusted Basis.  So for tax purposes, that is a gain (not a loss).

[TaxGuyBill]

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@qbteachmt wrote:

"The fact that it was at one time a personal residence or that they are in the military is irrelevant."

I think this is the pertinent detail:

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That is not pertinent because the OP said it was sold at a loss (and later seems to have clarifies a gain, but for less than the original purchase price).

[sjrcpa]

So we throw in a whole bunch of extraneous crap, but we don't know how to compute/tell if there is a gain or loss. 

Sale Price minus Adjusted Basis =  Gain (or Loss)

Adjusted Basis = Cost + Improvements minus Accumulated Depreciation.

[qbteachmt]

I was highlighting the "2 of 5" provision is "2 of 15" for military. Not whether or not this applies, because this topic shows a complicated mix of contradictions.

The OP seems to consider this as having two primary residence sales (and capital gain exclusions) considerations, according to the OP, in the same tax year, which by itself is an issue.

Details always matter.

[qbteachmt]

"So we throw in a whole bunch of extraneous crap"

Throw it at the wall and see what sticks.

[Tarulad]

Did you figure out where to enter the information for a member of the armed forces? More specifically, where can I can elect the 5 year suspension?

[TaxGuyBill]

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@Tarulad wrote:

Did you figure out where to enter the information for a member of the armed forces? More specifically, where can I can elect the 5 year suspension?

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I'm not aware of a need to enter it, and there is not an "election" for it.  Just enter the information based on the extended five year period.  So if the Home Sale Worksheet has a question that includes "five years", just treat it as "five years plus the time in Qualified Extended Duty (up to 10 additional years)".