basis for inherited rental property

[Jesse]

"To speak ill of others is a dishonest way of praising ourselves; let us be above such transparent egotism. If you can’t say good and encouraging things, say nothing. Nothing is often a good thing to do, and always a clever thing to say." - Will Durant

I like that quote.

I'm still researching for some more definite instruction, if I should find more info I'll let you know.

[abby]

an answer

In my defense, sometimes I ask questions I think I know the answer but lack the self confidence that I am 100% correct.

Jesse, I can't find an answer in this thread, so I will offer my 2 cents. If there was a 100% step up because of community property and this is a married couple, then I would probably end old depreciation on the date of death and create a new asset at FMV on the date of death, but code it as 'inherited' in my software so it would receive long term treatment. In a non community property circumstance where only 50% received step up, the setup would be different.

I'm truly sorry you were put on the defensive at all, and as to whether you should feel free and comfortable to ask anything you darn well please I'm going to haul out one of my favorite quotes:

"To speak ill of others is a dishonest way of praising ourselves; let us be above such transparent egotism.
If you can’t say good and encouraging things, say nothing. Nothing is often a good thing to do, and always a clever thing to say." - Will Durant

[Jesse]

In my defense, sometimes I ask questions I think I know the answer but lack the self confidence that I am 100% correct. I have even asked this same question before, it just seems to be too good to be true and rules/laws do change, I try to keep up with changes, however sometimes I fail to learn it all. As well, there is always the possibility that once I think I have it all down pat there is an exception to the rule. Sometimes I ask a question because I just don't know the answer. It's also nice to have variables tossed in to mix up the picture and point out overlooked scenerios.

I have looked for information on depreciation of an inherited asset, but the information I have come across seems to be predominantly gains and losses on the sale of…the basis of the inherited asset is FMV as of date of death. Nothing concerning the calculation of the depreciation. I may be missing something that is right in front of my face – but that’s just the way it is.

It might sound idiotic to prorate an inherited asset, but because I can’t find guidelines to tell me otherwise I’m not going to assume that this might be a possibility. I have not found anything to tell me to prorate, but I have not found anything to tell me not to, or to depreciate as acquired of 01/01/XX, or to depreciate starting as of DOD?

My office consists of me, myself and I – and this board – you are my people, and generally I appreciate and respect each of you. If certain professionals think less of me for this, well, that’s just the way it is. When someone asks a question that to me seems obvious I am more than happy to answer, but I usually start with - someone will correct me if I’m wrong – and sometimes I stand corrected and sometimes not. There are so many grey areas and constant changes, expiration and reinstatement of provisions, etc…so yes I am a student and I will be a lifetime student in the field of income tax.

[JG EA]

JG-EA sorry if I upset you but it is upsetting, at least to me, that Jesse appears to be a student not a tax professional. Jesse is asking questions that should have been addressed in a basic tax course. Since we can no longer get to posters profiles it is hard to determine the level of experience, training and/or expertise. taxea

I was not upset, but thought Jesse might be and then feel bad and not post again. I have been in that position, my post was Ignored or shown to be less than brilliant and I took it personally (silly on a medium where no one knows you but there it is) so stopped asking questions for a while.

I have been corrected for many misstatements or even attitudes in the past, so I hope you now don't feel picked on either.

[taxmom34]

when i worked in an office with 4 or 5 preparers , even if they were in their first or second year, if i was unclear as to how to handle a specific issue, just asking a question out loud would give me the answer, before i was done asking. so sometimes if you can't bounce it off someone in person, it helps to just type it out. and with so many professionals here i really feel like i'm getting all the help i need to do a good job for my clients.

[Lion]

My impression

My impression of Jesse's questions was that he had a picture of the flow but difficulty putting into words the details, most probably how to enter it in his software when part of the picture carries forward from prior years to a now changed year. Not an uncommon situation for any of us preparers the first time we encounter an issue with a new twist

Giving it to another preparer is not always the best solution. The existing preparer may have much in his own memory and in his notes that is not easily transferred to another preparer. The client may be reluctant to change considering she has just gone through a major loss in her life.

Asking questions at our virtual water cooler is a starting point for many of us. And, sometimes we do find we have to have someone help us more extensively as we learn to take care of that client's changes. But, don't sell any of us short on our ability to learn what to do in a new to us situation. After all, we're all very experienced at learning many new tax laws before each tax season. And, most of us, especially those with letters after our names, take many CEUs each year, both reinforcing our knowledge to serve our core clientele and learning a new topic(s).

[Jesse]

Jesse, I see that your post says that you are a senior member but this issue seems to be way beyond your experience. May I suggest you hook up with a professional that has more experience. taxea

JG-EA sorry if I upset you but it is upsetting, at least to me, that Jesse appears to be a student not a tax professional. Jesse is asking questions that should have been addressed in a basic tax course. Since we can no longer get to posters profiles it is hard to determine the level of experience, training and/or expertise. taxea

I apologize for responding so negatively, temper flared. Let me rephrase my question, did I do something to upset you?

[S T]

Taxea, In Case You would Like to Know

Senior Member on this Message Board does not necessarily relate to the number of years of being a Tax Professional and expertise , but relating to the amount of time and the posts that "one" has made on the The TaxBook Board.

Laura, once I again I have an issue with some of your replies to our fellow posters. Almost everyone that posts on this Board is a valuable resource to many of us and I believe that most all should be addressed with respect and the courtesy they deserve. You can do a search on the "user/poster" and find most often than not, that they have contributed.

It has been suggested many times, that if a reader does not like the post or finds an issue, that maybe they should refrain from reading and answering.

At least if you answer a post, maybe it could possibly be in a more pleasant way.

Jesse, is a professional and has posted many threads and answers with some very good information.

IMHO

Sandy

[taxea]

JG-EA sorry if I upset you but it is upsetting, at least to me, that Jesse appears to be a student not a tax professional. Jesse is asking questions that should have been addressed in a basic tax course. Since we can no longer get to posters profiles it is hard to determine the level of experience, training and/or expertise. taxea

[JG EA]

A thought for taxea

Jesse, I see that your post says that you are a senior member but this issue seems to be way beyond your experience. May I suggest you hook up with a professional that has more experience. taxea

He did.

This board is so helpful because we can bounce ideas off other preparers. Usually people on the board are the only preparer in an office. Sometimes it may seem that questions reflect ignorance - they do - but not ignorance of all tax law. We may need to get a few basic questions answered in order to make sense of what we are studying, or trying to figure out.

Perhaps we may see someone is in over his or her head, but someone else may put us on the right track – when that happens it is so welcome.

I personally feel that much in this business is over my head – in fact impossible in many cases. Over the years I have tackled many of these and knew that it was a challenge that could be met. I don't think we should assume that asking questions that don’t sound like we are already well versed in the subject means you should turn the whole issue to another. If you mean consulting with someone else, then that is what is happening on this board.

[taxea]

basis for inherited rental property

Jesse, I see that your post says that you are a senior member but this issue seems to be way beyond your experience. May I suggest you hook up with a professional that has more experience. taxea

[Jesse]

After thought -

How do you calculate depreciation for the entire year?

Do you treat the property as being acquired as of 01/01/08?

Or do you run two different schedules for the year of death, one with the cost basis up to the date of death and the other with the FMV starting at the DOD?

[Davc]

Yep............

[Jesse]

I have a similar situation in a community property state with two residential rental properties receiving 100% step up basis. These properties were originally purchased in 1992. Do I now start the properties over so to speak and treat them as purchased as of date of death with no prior depreciation?


Lets say the properties were purchased for $50,000(without land value) with accumulated depreciation of $29,000 for an adjusted basis of $21,000.

The FMV at date of death is $125,000(without land value).

Do I now start the depreciation over with $125,000 basis over 27.5 years?

[Burke]

First, if the property was bought before some date in 1972 or 1977 (I jsut can't remember which) and only the husband's money was used to buy the house then there is a 100% step up in basis. All prior depreciation gets wiped out. If bought after that date or wife contributed to the purchase price then you reduce the current depreciable basis by 50% and drop 50% of the accumulated depreciation and then start a new asset that reflects 50% of the date of death value less land value.

It's any property bought and jointly held by H/W pre-1977. It's all included in his estate (or first to die) unless spouse contributed to purchase with own funds.