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.