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I have a question regarding how to handle the sale of an…

I have a question...

I have a question regarding how to handle the sale of an investment property that I sold in 2017.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I purchased the property as an investment in may 2015 spent roughly 2 years renovating it and sold it in late 2017. I was under the guidance all the expenses in the renovation over the two years will be added to my cost basis. My question is. I have never rented it nor taken any depreciation over the two years of ownership, so do I just report the sale under my schedule D as an other investment. I am adding up all my expense ( mortgage costs, materials, travel etc) and will add them up and add them to the basis.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

That's the basics of it

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Answered in 13 minutes by:
3/23/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,692
Experience: Taxes, Immigration, Labor Relations
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Basically - you have correct understanding.

You might get form 1099S which will report your sale price.

If not - use teh sale price from HUD1 statement.

All renovation costs are capitalized and added to the basis (original purchase price)

You will also add selling expenses, inspection costs, etc.

You may not add mortgage interest to the basis - that is deducted as investment interest on schedule A.

But the cost of getting the mortgage is added to the basis.

You will add to the basis - insurance, maintenance costs, utilities, materials and payments you made to contractors.

You may not add to basis your own travel costs - unless that is your business activity.

.

The sale transaction of your investment property is reported on form 8949 - assumable long term as you held the property more than a year.

https://www.irs.gov/pub/irs-pdf/f8949.pdf

check box (F) Long-term transactions not reported to you on Form 1099-B

Let me know if that helps.

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Customer reply replied 1 month ago
Ok, so I can deduct the interest on the mortgage in schedule a vs schedule d. I didn't deduct it for either year prior so do I deduct the total interest over the two years in this 2017 year, the year I sold it

You may go back and deduct investment interest in the year it was paid.

We may not deduct expenses paid in 2016 ob your 2017 tax return.

That deduction might be limited by investment income in that year - so you will have to use form 4952 with your tax return.

https://www.irs.gov/pub/irs-pdf/f4952.pdf

unused portion will be carried to the following year.

So - you will use form 4952 every year you paid investment interest.

Lev
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Customer reply replied 1 month ago
both 2015 and 2016 would have less interest income than the interest expense for this property had I deducted it. So I'll amend thoes and use form 4952 to cary it over each year. Ok thanks I think this gets me going in the right direction
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