Depreciation on inherited rental from Spouse (step up basis)

[nwtaxlady]

Clients had a rental house that they purchased back in the 70's for $37,000 and is fully depreciated. Taxpayer died in 2012 and Spouse inherited his half (owned jointly 50/50).

Rental house is fully depreciated.

FMV on DOD is $100,000

What is the $ amount the spouse gets to depreciate?

Is it $50,000 or is it $31,500 ?

My question is, is it the full $50,000 which is half of the FMV on DOD. OR do you take 50,000-18,500=31,500 ?
Do you take the $50,000 less her 1/2 of depreciation all ready taken and then start depreciating the difference?

Its been awhile since I have had this situation.

[DaveO]

Assuming you are not including the land in the $100k figure her basis would be $50k.

[nwtaxlady]

getting no replies here just views

This is what I am thinking.... do you agree or disagree?

Spouse gets half of the value on date of death $100,000 half would be $50,000.

On The depreciation schedule I woud list it as 1/2 step up in basis $50,000 less the value of land.

[luke]

no depr

If inherited house had already been depreciated then NO MORE depreciation is allowed!
IF surviving spouse decides to sell he BASIS for the sale would be her original 18,500 + 50,000 stepped up basis on other half ........

[Dusty2004]

1/2 the value of the lane

This is what I am thinking.... do you agree or disagree?

Spouse gets half of the value on date of death $100,000 half would be $50,000.

On The depreciation schedule I woud list it as 1/2 step up in basis $50,000 less the value of land.

On the depreciation schedule you would list it as 1/2 step up in basis $50,000 less 1/2 the value of the land

Dusty

[Dusty2004]

Not sure I follow

If inherited house had already been depreciated then NO MORE depreciation is allowed!
IF surviving spouse decides to sell he BASIS for the sale would be her original 18,500 + 50,000 stepped up basis on other half ........

What does the $18,500 have to do with the basis calculation? Was that not fully depreciated or do I misunderstand the question?

Why, if the basis stepped up by $50,000 with the death of the spouse, would you not be able to depreciate the $50,000 - 1/2 the cost of the land?

Dusty

[WhiteOleander]

If inherited house had already been depreciated then NO MORE depreciation is allowed!
IF surviving spouse decides to sell he BASIS for the sale would be her original 18,500 + 50,000 stepped up basis on other half ........

This is not correct. The property begins new depreciation.

[Jiggers]

Are you in a community property state? Big difference in answers.

[nwtaxlady]

NOT in a Community property State!

Are you in a community property state? Big difference in answers.

No, client is Not in a community property state.

[mactoolsix]

If inherited house had already been depreciated then NO MORE depreciation is allowed!
IF surviving spouse decides to sell he BASIS for the sale would be her original 18,500 + 50,000 stepped up basis on other half ........

From Pub 551 - Under Inherited Interest - Qualified Joint Interest
Include one-half of the value of a qualified joint interest in the decedent's gross estate. It does not matter how much each spouse contributed to the purchase price.

Basis. As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Decrease the cost by any deductions allowed to you for depreciation and depletion. Increase the reduced cost by your basis in the half you inherited.

Her cost was 18,500
Depr Adjustment (18,500)
Basis in the half inherited FMV 50,000
New basis for the surviving spouse is 50,000

Depreciation starts over. (Sorry but I can't find a cite for this)

Tax Almanac has a couple discussions

http://www.taxalmanac.org/index.php/Discussion:Taxation_of_depreciation_on_rental_property_inherited

Mike

[New York Enrolled Agent]

Depreciation starts over. (Sorry but I can't find a cite for this)

Mike

Mike

This might be what you want - Reg. §1.1250-3(b)(2)