Inherited home to rental

[Possi]

I am working on a 2007 return for a client who inherited a house and is now using it for rental. I read TTB and searched the listed depreciation items, but can't find how long to depreciate a new Heating system. I read an old 2005 post that said 15 years. Does that still hold true?
The basis if FMV at the time of death and they did extensive repairs before it was ready for rent and after it was ready for rent. They are working on splitting those expenses now. The repairs before it was ready to rent are cap'd and added to the basis. (right?)
They took out a loan to pay for all these repairs and improvements, so I have interest and bank fees.
Please correct me if I am wrong. Inherited property can be tricky, I know.

thanks and welcome to a new year!
~donna aka possi

[taxea]

If the intent was to rent and they were advertising, even word of mouth, that it would be a rental then the expenses to get it ready are deducted or depreciated...depending on what the upgrades were. If not, I would add the structural items to the basis and depreciate it that way.
Heating system would be the same as appliances. taxea

[Jesse]

http://www.irs.gov/faqs/faq/0,,id=199623,00.html

Check out Publication 527, Residential Rental Property

[Possi]

The IRS link...

...was exactly what I was looking for, Jesse. How did you find that page? Put the question in a search mode on the IRS website?

Regarding the heating system, the link said it is depreciated over 27.5 yrs. Did I understand that right? Must that be depreciated over 27.5 years regardless of the reason? It hardly seems right when the new units are so much more energy efficient and the government is giving cudos for energy efficient changes these days.

Taxea, you have cleared up what has been a question for me, too, in the intent to rent. I always thought it had to be ready to move in before some of the things were expensed.

Thanks again...

Reading the pub led me to a new question. When the property is sold, isn't just the dep'n on the building recaptured? If so, I will need to separate the improvements for dep'n and not lump them all into the initial basis of the property.

[S T]

Depreciation Schedule

I usually separate by

Loan Costs
Land
Bldg
Improvements (Major) and then by type some are 27.5 some are 15 year, etc.
then lesser improvements over the years, such as carpet and appliance replacement.

Each will show up on disposition and then you can allocate the sales price. Depends on your tax program.

Sandy

[Possi]

thanks!

Thanks, Sandy. I will do that from now on. I haven't had that many that I have had to set up basis plus improvements, etc. Most have been straightforward. I will certainly break it out from now on.
~possi

[taxmom34]

depreciation

i was always told that if the improvement (heating system) was attached to the building it is depreciated at the same rate as building. in other words if you cant take it with you when you sell it is attached to the building(so my instructor described it)