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Visitor II

Capital Gains Exclusion on Sales of Rental Property ?

I am trying to research this topic and see if it applies to my situation - in doing so I came across the following entry from the IRS FAQ web site which closely matches my case.

 

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/prope...

 

Briefly, I bought a property in 2010 and moved out in 12/2015 to take another job in another state( more than 50 miles from my current home) - in 02/2016 I found a tenant and rented out the property - we didn't know if we would like living in the new state so just wanted to hold on to our property just in case - fast forward to 01/2018 and I asked my tenant to move out and put the property up for sale in 02/2018 - the property sold at a gain and after doing some research I came to the conclusion that all I owe is the depreciation recapture tax for the years I had the property as a rental( 02/2016 through 01/2018). Do I also need to file a form 4797 ? How does Turbo Tax handle this kind of scenario ?

 

Thanks in advance.

 

4 Comments
TurboTax Specialist

Capital Gains Exclusion on Sales of Rental Property ?

Yes, this sale will be recorded as a sale of business property in 2018. You will dispose of the property in the rental section. Under the Asset/Depreciation section, there will be a question regarding the property's non business use.

TurboTax Specialist

Capital Gains Exclusion on Sales of Rental Property ?

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Visitor II

Capital Gains Exclusion on Sales of Rental Property ?

We used this as our main home prior to the time we did not use it as our main home - and this falls within the 5 year exclusion rule - the law states that the capital gains is excluded from taxation ? Can you please point me to an IRS regulation which states otherwise ?

Catalyst V

Capital Gains Exclusion on Sales of Rental Property ?

" Can you please point me to an IRS regulation which states otherwise ?"

Why? I've read through this thread and I don't see anything that could be interpreted as stating otherwise. If you lived in the property as your primary residence for at least two of the last 5 years you owned it, counting back from the closing date of the sale, then you qualify for the exclusion.  Maybe someone disagreed with that statement before, and has since deleted their comment?