sale of rental property

[mcd1231]

Greetings all:

Just looking for some reassurance.  Never had to tell a client they owe over 120K between Federal and state. First I went into each asset and input the date of disposition. Next I checked box H that it was a fully taxable transaction.

Client purchased a rental property back in 1998 and never lived there.  He paid 75,000 for the property and made 32,000 in updates over the years.  The sale price was 550,000. 

I calculated the gain on the sale as follows:

550,000 sales price

+ 73,864 depreciation recaptured

 -75,000 cost of house

- 33,852 expense of sale

 $515,012 gain on sale

[abctax55]

I don't see you included the $ 32,000 in improvements as basis in your math.

But yes, big gain with resultant tax hit.   

[Accountant-Man]

If they never rented, depreciated or renovated it, even they have to understand that a house bought for $75k and sold for $550k is gonna cost some tax money.

[ljr]

make sure you tell them with confidence. if you seem unsure, they will be relentless in asking you if they really owe that much