Recording the Sale of a Unit within a Multiplex

@hosburg1 

To answer your first question, I would say that you recorded it properly if it was purchased as one unit.  If it was purchased as six separate units with six separate deeds and parcel IDs, then it should be recorded as six units.  It sounds like a single loan, so it should have been recorded as just one loan payable. 

As far as recording the sale, did you take depreciation on the building or was this a flip?  If you took depreciation, you will need to confer with a CPA/tax accountant to figure out depreciation recapture on the particular unit(s) sold.  If you didn't, you should still confer with your CPA/tax accountant.  You will need to determine your basis allocated to the units you're selling.  So, for example, if all 6 units are identical, your basis in each unit is $333,333 ($2,000,000/6 - assuming no depreciation taken or cost added to the unit - an unlikely scenario).  If you sell the unit for $500K, you would make the following journal entry:

This is beyond the scope of your question, but your lender will need to know that you're selling individual units since the collateral that secures the loan will change.

Just my $.02.

Thank you for responding!

We sold the first unit for $550,000.000.  I will ask the owner to run this by his CPA to determine the basis allocated to the units, as you mentioned in your response.

Would you mind if I reached out to you again after hearing back from the CPA?

Of course. Just post here with any additional questions. 

Is there any way you can walk me through entering the closing statement from the sale into Desktop without having the CPA questioned answered just yet?

I will have to reproduce this transaction 6 times, so if you could help me with the first one, I would greatly appreciate it!

@hosburg1 

Unfortunately, there is no one that can help until you know your adjusted basis in each unit sold.  Your adjusted basis in a unit sold is generally your purchase price (what portion of the $2M is being allocated to each unit sold) less depreciation taken plus qualified improvements made to each unit.  Without that, the entry is a wild guess and it will drastically influence the amount of income you report on each unit sold and, ultimately, the tax liability owed on the sale.  You need to contact a CPA and determine your adjusted basis.