How to Report the Sale of Rental Real Estate

The Internal Revenue Service treats the proceeds from the sale of rental real estate as long-term capital gains. Depending on your gain or loss on the sale, you may need to record information about the sale on numerous forms, including Form 4797, Schedule A, Schedule D and Form 1040. Failing to correctly report the sale can lead to underpaying any taxes due, and the IRS will add penalties and interest to the additional tax amount.

Place your name and Social Security or employer identification number on the top line of Form 4797.

Enter the gross profit from the sale on line 1.

Go to Part III of the form, which is where you enter information about residential real estate.

Enter the property's address as the description in column A of line 19. Enter the date you acquired the property and the date of the sale in columns B and C.

Put the figure from line 1 in the first column of line 20, marked "Property A."

Enter the basis, or the value of the residence when you acquired it, on line 21. Enter any depreciation on line 22.

Subtract line 22 from line 21 to get the adjusted basis. Place this figure on line 23.

Subtract line 23 from line 20 to get your total gain. Place this number on line 24.

Enter "0" on line 26a unless the property was subject to additional depreciation after 1975 or between 1969 and 1976. In that case, enter the relevant information on lines 26a and 26d, complete the math on the necessary lines and enter the result on line 26g.

Place the figure from line 24 on line 30. Place the figure from 26g on line 31. Subtract line 31 from line 30 and place the result on line 32. This your final gain on the sale.

Enter the figure from line 32 on line 6 on the first page of the form.

Add any additional figures on lines 3 through 5 to the amount on line 6 and enter the result on line 7. If it is a positive number, enter it in Part II of Schedule D. If it is negative enter the amount on line 11 of Form 4797.

Add any additional gains of losses from lines 12 through 16 and enter the result on line 17. Complete lines 18a and 18b as necessary and enter the information on line 28 of Schedule A or line 14 of Form 1040.

 

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