Property Sale - Tax Question

I am selling a 12 unit complex. I have treated the building, land, a capitalized improvements as separate items. I have no problem allocating the sales price between the building and land. However, how do I dispose of capitalized improvements such as an 11,000 new roof that I put on last year. If I dispose of it at 0 dollars, turbotax throws the 11,000 ordianary loss onto line 14 on my 1040. I like that, but is that the right way to handle it?

Let me ask this question another way. I sold the complex for 450K allocating 60,000 to land and 390,000 to bldg. About 8 months prior to selling I put a new roof on half the building at a cost of 11,000. Now, when that I have sold, can I dispose of the 11,000 new roof at 0 or do I assume that 11,000 of the purchase price is for the new roof. Reality is that the buyer bought the complex sight unseen and gave me no real value for the new roof.

Any thoughts?


First thought, GET RID OF TURBO-TAX !!!

Have used it for about the last 7 years and actually have no problems with it but for one thing.

IF YOU DON’T KNOW TAX LAW, THE ANSWERS TO THE QUESTIONS CAN BE ANSWERED INCORRECTLY!!! All caps for a reason!! Used Home and Business several years ago when I started a mortgage reduction business. Finding out now that some of my deductions that were taken were shouldn’t have been. I’ve also had to file son’s returns because of not clear enough instructions, and online help was help at all. Just one exception to child income is what is the problem. No mention of it on T-T at all.

Now to your question. Was it a capital improvement or a repair???

If repair, expense. If improvement, probable section 179 depreciation. How its going to work on figuring cost-basis will be the question.

Now that I’ve been trained in tax prep and IRS publications, I wouldn’t use it again. That said, we use Quickbooks for our accounting clients, and I actually like Intuit products.

Let us know,


Thanks Kevin, the roof repair was considered a capital improvement, not a repair. My basic question is how much of the sale price do I allocate to the new roof. The cost was 11,000 and had been done less than a year before the property sale. I have to dispose of all the assets related to the property, the question is at what price.

If I dispose of the roof repair at o, turbo tax throws the 11,000 depreciation that is left into ordianairy income (as a loss) on line 14 of my 1040 because the asset was held less than a year. I like this but don’t know if it is right.


Section 179 does not apply to the passive income activity of rental property operation. A roof replacement is Section 1250 property that must be depreciated to achieve cost recovery.


Thanks for the clarification. Like I’ve said in some other posts, this is the first year in a business setting doing taxes. We are taking refresher classes this week because we will see more of this type of return when the business type clients come in to the office.

I’ ve had a few clients with rental props and haven’t had any problem with their returns. Like anything, its getting the right information and doing what you need to do. I’m right up front with a client, I’ll double-check any question with our more accomplished preparers, and our owner is a CPA, so its not like I’m totally abandoned. And I also have about 15 IRS publications saved on my laptop.

We learned a lot in class, but there’s only so much you can cover. It was very intense but after a while it all starts to sound the same. People catch different things about each topic, and we’ll ask each other about different topics that we are stronger in.

Depreciation is probably one of the trickier parts of the tax code because it can be INTERPRITED (sp??) several ways. And each situation is different. That’s what I’m finding to be the most intrigueing thing in this business.


sounds like you’re trying to calculate your gain on the sale. try this:

amount realized= cash received+ value of property received + taxes assumed by buyer + mortgage assumed by buyer

adjusted basis = cost + improvements (roof) + selling expenses - accumulated depreciation and section 179

gain or loss = amount realized - adjusted basis

Mark Wagner, CPA


Spud wants to know how to fill out his tax return using TurboTax when he sells property consisting of more than one depreciable asset.

Here is my suggestion, tell us if you agree.

A roof is a major capital asset which potentially has a high cost. When you do your tax reporting for the sale, I would declare this asset sold at whatever remaining cost basis you have in the roof. Then adjust the sale price allocated to the rest of your improvements accordingly.

For example, you sell your property and net $200K after selling expenses. When you initially placed the property in service, you allocated 25% of your purchase price to the land value, leaving 75% of your purchase price as the depreciable basis for the improvements. Therefore when you sell, you allocate $50K (25%) of your net sale proceeds to the land, and $150K to the improvements.

Let’s say that the improvements consist of two depreciable assets – the structure and a two year old roof. Let’s say the roof has a remaining depreciation basis of $9K. I would allocate $9K of my sale price to the roof and $141K to the rest of the improvements.

I don’t know turbotax, so I can’t give specific advice for what to put in which blank. That outta work though-- the logic makes sense.

at the end, though, it should tell you what your taxable gain is. Run that thru a “sanity check” using the basic formula. if it’s not close, then something’s in the wrong blank.