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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I bought rental houses over the yrs and because of health

Customer Question

I bought rental houses over the yrs and because of health issues I've sold the whole lot. The houses cost me 475k with accumulated deprec of 300k. I sold the houses for 200K with a down pymt of 15K with zero interest. I know its a capital lost, but is there anything thats add back in as income. How do I report this?
Submitted: 9 months ago.
Category: Tax
Expert:  Lev replied 9 months ago.

You will likely report the sale of each property separately.

All sale transactions are reported on form 4797

Rough estimate will be

200K (selling price) MINUS $175 (adjusted basis 475k - 300k) = so I see a loss of $25,000

That loss is fully deductible against other taxable income reported and will be reported on form 1040 line 14 as negative amount.

However - because you sold on installments - and the sale contract does not have state interest rate - there must be so-called imputed interest. If the installment sales contract does not provide for adequate stated interest, part of the stated principal may be recharacterized as imputed interest or as interest under the original issue discount rules, even if you have a loss.

You must use the applicable federal rate (AFR) to figure the unstated interest on the sale.IRS publishes these rates here

https://apps.irs.gov/app/picklist/list/federalRates.html

So if you add interest - your loss will be more than that - and you will claim interest income in coming years.

Let me know if you need any help with reporting.