Form 1041 depreciation basis

[AccTaxMan]

Taxpayer passed away in 2010. What is the depreciation basis of a rental property on the Fiduciary tax return (Form 1041)? Does the fiduciary use the carryover basis from the decedent or can he use a step-up basis based on the current market value of the rental property?

[NSNM]

Stepped up basis

Stepped up basis, placed in service on the date of death, and applicable depreciation rate.

Very lucid comprehensive example is provided on pages 24-25 in IRS publication 559 (2010) Survivors, Executors and Administrators. Very helpful.

[AccTaxMan]

Stepped up basis, placed in service on the date of death, and applicable depreciation rate.

Very lucid comprehensive example is provided on pages 24-25 in IRS publication 559 (2010) Survivors, Executors and Administrators. Very helpful.

Thank you for your answer.

So in order to determine the step-up basis, can the fiduciary make his own determination by doing research on the internet? If he knows a real estate agent, can he use the estimate from the agent? Or does he have to officially hire an appraiser to do it?

Thank you again for your help.

[appelman]

I'd recommend an appraisal.

That should have been done as a routine matter at the time of death. Of course, you still need to break out land and depreciable basis. Also, this answer assumes that the estate is NOT electing to be governed by the zero-inheritance-tax option for 2010. If this is not the case, basis determination can become more complicated.

[NSNM]

Professional Appraiser

Professional appraiser's property valuation will protect from IRS challenges.

If IRS needs appraised value for donated property (high valued), I would imagine you need professional appraiser for decedent estate. In this regard refer to Publication 561, Page 6 for Real Estate appraisal.

[AccTaxMan]

Thank you for everyone's input.

One last question, should the prior depreciation claimed by the deceased person be carryover and become the starting prior depreciation in the fiduciary tax return?

[appelman]

Prior depreciation disappears!

You start from scratch with the new stepped-up basis. It's a nice perq!

[AccTaxMan]

That should have been done as a routine matter at the time of death. Of course, you still need to break out land and depreciable basis. Also, this answer assumes that the estate is NOT electing to be governed by the zero-inheritance-tax option for 2010. If this is not the case, basis determination can become more complicated.

Thank you!
Sorry, still another question...I promise this is the last one...

As for the other depreciable assets, such as a refrigerator, is the tax basis of the estate equal to the remaining depreciation balance of the deceased person?

For example, the original cost of the refrigerator is $700. The deceased person had a total prior depreciation of $300. So the estate has a tax basis of $400. Is it correct?

[dsi]

Acctaxman, everything gets a basis adjustment, and it's not always a step up. Get appraisals.

[AccTaxMan]

Acctaxman, everything gets a basis adjustment, and it's not always a step up. Get appraisals.

I hope you are not saying that the taxpayer will have to order an appraisal report for a piece of used equipment that costs $700 originally...He could use the appraisal fee to buy a brand new one and more...