Replaced Rental Mobile Home

[Justataxguy]

Client updated mobile home rental property in October with a newer model. Old MH is being scrapped, so no selling price for 2014, and will only have value of scrap for 2015, (which I assume will be other income on 2015 Sch. E?). In calculating Gain from Disposition of Property on page 2 of form 4797 (part III), we come up with a (for example) minus 6k figure on line 24, which then also goes on lines 25b, 26b, 27c, 28b and 29b. Line 30 is the minus 6k figure, line 31 is the other five lines referenced added together which is minus 30k, which is subtracted from line 30 giving an answer of plus 24k on line 32. These figures then show up on the 1040 as a Capital gain of 24k on line 13 and a loss of 30k on line 14. Does this sound right? I looked up math rules for subtracting negatives from negatives and it appears to be correct. Haven't done anything like this before, want to make sure it's right.

[Roland Slugg]

...which I assume will be other income on 2015 Sch. E?

No, it will not. Even if the mobile home (MH) is sold for scrap, it should still be treated for tax purposes as the sale/disposition of real property. The amount received as its scrap value will be the selling price.

These figures then show up on the 1040 as a Capital gain of 24k on line 13 and a loss of 30k on line 14. Does this sound right?

Absolutely not! A taxpayer can't have both a gain and a loss from the sale of a single asset ... it's one or the other. I didn't try to follow your post and all the references you made to lines on F-4797, but you definitely have something wrong.

There will be a net gain if the selling price is greater than the MH's adjusted basis, and that gain will flow from F-4797 to Schedule D (F-1040). If the selling price is less than the MH's adjusted basis, there will be a loss on its disposition, and that loss will flow from F-4797 to Line 14, F-1040. Don't forget about suspended prior year PALs, if applicable.

Finally, if there is a net gain, that gain will be "Unrecaptured §1250 Gain," and should end up on page 2 of Schedule D (F-1040), line 19.

(The line numbers referred to above are the ones for the 2014 forms. If the sale in question is reported on the taxpayer's 2015 return, the line numbers may be different.)

[Justataxguy]

you definitely have something wrong.

Found the mistake. Had it in the wrong part of 4797. Thanks.