Here are your answers and you are all set to complete your tax return.
- Am I correct in entering the HVAC and the appliance in the asset section of the rental, and prorating my gain and expenses across these assets as well? Or should I just enter them as a sales expense? By allocating my expenses across these assets, I am basically increasing the cost price. Is that correct?
- No, an asset placed in service and removed from service in the same year are not allowed to be depreciated. Add them to the original cost basis and keep the entire sales price for the combined assets in one entry.
- I added the difference between Purchase Cost and Rental Basis (256.5 - 235 = 21.5K) to the other Sales Expenses. Basically, I increased the sales expense by 21.5K. I hope this is what you meant.
- Yes, that is what I meant. You will also add the amount from step 1 here as well.
- Can you please confirm if my calculations make sense. I just want to make sure I understood your formula.
- Yes, spot checking a few calculations this all seem accurate. Keep all of your records with your tax return.
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