Accounting Question, Please

[MJ]

I am in the process of finishing my 2006 tax return which I do annually with TurboTax. I was hoping I can get an answer to my question.
In 04/2006, I sold my 2 family house where I lived and rented out the 1st floor apartment. In 09/2004, I put in a new roof which I began depreciating 1/2 the cost. I was surprised that Turbo Tax based on the 2004 date did not add 1/2 of the left over roof cost to the business portion of the cost basis. Is there something I need to do to capture the bulk of 1/2 the cost or am I out of luck. According to TT, if I had installed the roof 7 months later, I would have saved nice a $1k.

Any help pointing me in the right direction, besides suggesting a good accountant, would be appreciated.

Thanks

MJ

 

[SecondCor521]

Don't you have to give TT the business basis? If so, and if it's proper tax-wise (I think so, but IANAA), just do the basis calculations yourself and plug in the number.

If I were doing this, I'd look up on the IRS website where disposition of business assets gets reported (It ends up on Schedule C but comes from a worksheet, IIRC) on their forms, then go look at those forms in TT and figure out how to get the right data on there. It takes a bit of analysis.

2Cor521

 

[trirod]

I am an accountant but don't use TurboTax so I'm not sure how you tell TT that half the roof should be included in the business element of the sale. Ultimately the sale should be shown on Form 4797, Part III, as a "Section 1250" Disposition (real estate). You will get basis for the undepreciated half of the roof cost in 2004 - I'm sure there must be a way to link this into the sale calculation automatically. It would be better to get TT to calculate it because the gain attributable to recapture of depreciation is taxed at a potentially higher rate than that attributable to the regular appreciation, so it gets a bit complicated.

 

[MJ]

I screwed up.
TT is working properly.
When I did my preliminary 2006 taxes last year, I used 2005 TT but I had to fudge the sale date so my anticipated 2006 taxes using 2005 TT was showing a larger tax refund. This was because the expense loss of the roof appeared to be a short term loss whic of course it is not.

Mystery solved, thanks to you, Trirod.

MJ