Recording a property sale involves removing the asset from your books, clearing out the accumulated depreciation, and recognizing the gain or loss. Getting these entries right depends on good records throughout the holding period.

You need three numbers: your original cost basis including capitalized improvements, the total accumulated depreciation taken, and the net proceeds after closing costs. Your adjusted basis is the original cost minus accumulated depreciation. This is where working with a fractional CFO for real estate throughout ownership pays off, since the depreciation schedules and basis tracking should already be clean.

The bookkeeping entry removes the property from your balance sheet. Credit the asset account to take it off the books. Debit accumulated depreciation to zero that balance. Debit cash or a note receivable for the proceeds. The difference is your gain or loss.

Here’s an example. You bought a property for $500,000, capitalized $50,000 in improvements, and took $120,000 in depreciation. Your adjusted basis is $430,000. You sell for $600,000 net of closing costs. The gain is $170,000. The entry debits cash for $600,000, debits accumulated depreciation for $120,000, credits the building account for $550,000, and credits gain on sale for $170,000.

The tax side has layers beyond the book gain. The depreciation you claimed over the years is subject to recapture and typically taxed at rates up to 25%. The remaining gain gets capital gains treatment. If you’re considering a 1031 exchange to defer these taxes, that decision must happen before closing and changes how the transaction gets structured and recorded.

Tax planning should happen before you even list the property. Knowing your tax exposure ahead of time lets you evaluate whether to sell outright, pursue a 1031 exchange, use an installment sale, or time the closing differently. Once the sale closes, your options narrow significantly.