Inherited Rental Property Depreciation

[Uncle Sam]

Situation - I have a client who is one of four brothers who inherited residential property from the mother's estate. Each year including 2017 up to mid year - there's been a K-1 to report the respective taxable amounts. In 2017 - the estate must have been closed, and the property was equally distributed to the four brothers individually - the K-1 was marked FINAL. For the remainder of 2017 the client hands me a Schedule E printout schedule - had to have been from one of his brother's accountant's computer input forms - that shows the proper amount for rent and expenses - however - in looking at the depreciation schedule - it shows only a flat amount for the house without breakdown of land vs building. I call this to my client's attention and ask that he inquire about this to determine the proper breakdown. I'm then told "well - two of my brothers already filed their tax returns". So I advised him to check with all his brothers to see how they're going to treat it - my gut feeling is none of them know the difference. I've even advised him to go to the assessor's office for a breakdown ratio or look at a real estate tax bill if it shows it. He would like to file the return as is shown on the rental property input form.

What do you do in this situation if you can't get satisfaction of a correct amount to use for depreciation? I don't feel comfortable using the data provided by the brother's accountant for depreciation. And yes - it was depreciated for 27.5 years, straight line.

I've had this client for many years, but sometimes he pulls these real boners - he never contacted me when the transition took place to discuss this matter.

[TAXNJ]

Sounds like....

you are doing your due diligence especially when you say "I've even advised him to go to the assessor's office for a breakdown ratio or look at a real estate tax bill if it shows it.".

Had long time clients wanting to do something not correct only to say later " you told me it was ok to do it that way" after signing a disclosure statement of the correct way.

No longer "long time" clients.

[Uncle Sam]

It turns out - the client called this afternoon telling me he spoke to the accountant that prepared the Schedule E rental property and the value given for depreciation was just for the building value. I asked that he get back to me as to what the land value is so I can record it for future reference.
What a sloppy way for an accountant to prepare rental property information.

[TAXNJ]

Does your client....

It turns out - the client called this afternoon telling me he spoke to the accountant that prepared the Schedule E rental property and the value given for depreciation was just for the building value. I asked that he get back to me as to what the land value is so I can record it for future reference.
What a sloppy way for an accountant to prepare rental property information.

have a copy of the Estate return or Tax Assessor record or tax bill? Good to have when in doubt.

[taxea]

Situation - I have a client who is one of four brothers who inherited residential property from the mother's estate. Each year including 2017 up to mid year - there's been a K-1 to report the respective taxable amounts. In 2017 - the estate must have been closed, and the property was equally distributed to the four brothers individually - the K-1 was marked FINAL. For the remainder of 2017 the client hands me a Schedule E printout schedule - had to have been from one of his brother's accountant's computer input forms - that shows the proper amount for rent and expenses - however - in looking at the depreciation schedule - it shows only a flat amount for the house without breakdown of land vs building. I call this to my client's attention and ask that he inquire about this to determine the proper breakdown. I'm then told "well - two of my brothers already filed their tax returns". So I advised him to check with all his brothers to see how they're going to treat it - my gut feeling is none of them know the difference. I've even advised him to go to the assessor's office for a breakdown ratio or look at a real estate tax bill if it shows it. He would like to file the return as is shown on the rental property input form.

What do you do in this situation if you can't get satisfaction of a correct amount to use for depreciation? I don't feel comfortable using the data provided by the brother's accountant for depreciation. And yes - it was depreciated for 27.5 years, straight line.

I've had this client for many years, but sometimes he pulls these real boners - he never contacted me when the transition took place to discuss this matter.

The assessors information is only good for determining a percentage to use in calculating the value of the land. It will not give you your client's basis.

I would not use any figures provided by any other preparer unless/until you verify them to be correct.
You need
a copy of the Trust or Will to verify the percentage of ownership of your client
a copy of the appraisal at time of Mom's death to verify the FMV and to use to determine your client's basis in his share
rental land is not depreciated so the basis to your client should be 1/4 of the FMV at time of mom's death
a copy of the assessment for the year of Mom's death to determine land value percentage (land assessed value divided by total property value= land percentage. )
FMV on mom's death X land value percentage= total land value.
1/4 of FMV is your client's basis and 1/4 of total land value is subtracted from this basis for depreciation amount
Now you are ready to do a "mock" asset entry for depreciation using date of Mom's death as the "in service".

If the values you have diligently determined do not match the Sch E he was given by his brother then something they did is not correct. Use the figures you calculated on the return.