Which section of 4797 to use?

[hr(bob) hofmann@att.net]

My daughter and SIL bought a house in 1999 for $XX,XXX.00. They lived
in it for one year before buying another house and renting out the
1999 house. The value of the 1999 house in 2000 and 2001 was exactly
the same as in 1999 as the area it was in was stagnant. So, the cost
basis is $XX,XXX.00. They have to subtract the total claimed
depreciation since 2000 from the cost basis, and add in structural
improvements and selling and closing costs. I assume that they use
Form 4797, Part 1 as the "business" use was renting the house.

Other than entering the $$$ from 4797 on Schedule D and Form 1040, are
there any other forms they need to fill out for this transaction.
There was no rental income in 2009 and the fixing up costs to sell it
they will include as part of "improvements and expense of sale".

I have looked at the instructions in Pubs 544 and 551 and they seem to
indicate this is the correct procedure. The only thing I can think of
is can they can skip Form 4797 and just use schedule D?

Thanks for any advice.

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[Seth]

In article <d036a00c-8449-48dd...@j24g2000yqa.googlegroups.com>,
hr(bob) hof...@att.net <hrho...@att.net> wrote:

> They have to subtract the total claimed
>depreciation since 2000 from the cost basis,

Actually, that's the allowable depreciation. Even if they neglected
to claim it, they still have to subtract it from their basis.

Seth

[hr(bob) hofmann@att.net]

On Nov 28, 1:24�am, se...@panix.com (Seth) wrote:
> In article <d036a00c-8449-48dd-9cb3-ded44f65e...@j24g2000yqa.googlegroups.com>,

>
> hr(bob) hofm...@att.net <hrhofm...@att.net> wrote:
> > They have to subtract the total claimed
> >depreciation since 2000 from the cost basis,
>
> Actually, that's the allowable depreciation. �Even if they neglected
> to claim it, they still have to subtract it from their basis.
>
> Seth

Actually, they took the straight-line depreciation ever since they
converted the house to a rental, the same amount every year except
the first one where they took 11/12 of the annual amount because of
when they converted it to rental use. It adds up to $12,245.66 total
depreciation. Even after subtracting that from the initial cost of
the house, they have a net loss as the area where the house was
located is very depressed. Farm country in central IL, where the only
manufacturing has moved out, and farmers don't need second homes, even
if corn prices are way up.