Rental Property not sold and no longer used

[GTS1101]

If a client has rented out a house for a number of years and took depreciation what happens if after three or four years of renting they stop renting out the property and then convert the home into home care facility for the eldery? What happens with depreciation? Does it just stop? Do they have to recapture? Rented out starting in 2003. Does basis get transferred to new business when converted to care home?

Thanks!

GTS1101

[Bill Tubbs]

no recapture

If a client has rented out a house for a number of years and took depreciation what happens if after three or four years of renting they stop renting out the property and then convert the home into home care facility for the eldery? What happens with depreciation? Does it just stop? Do they have to recapture? Rented out starting in 2003. Does basis get transferred to new business when converted to care home?

Thanks!

GTS1101

Assuming this is all on a personal return, and title was not changed (e.g. from personal to a LLC or such).

Depreciation is not recaptured. Calculate what the adjusted basis is when they stopped renting, and use this as the basis for when they started the home-care for elderly. I don't recall off-hand how many years you would depreciate the building over for the home-care.

Bill

[ChEAr$]

sounds like

Assuming this is all on a personal return, and title was not changed (e.g. from personal to a LLC or such).

Depreciation is not recaptured. Calculate what the adjusted basis is when they stopped renting, and use this as the basis for when they started the home-care for elderly. I don't recall off-hand how many years you would depreciate the building over for the home-care.

Bill

since it's not residential rental any longer, 27.5 doesn't apply any longer.
And since it's now a business, guess how many years for the balance?

[Bill Tubbs]

non residential real property

since it's not residential rental any longer, 27.5 doesn't apply any longer.
And since it's now a business, guess how many years for the balance?

Yeh, I know non residential real property is 39 years. But what I can't remember is that if the property was 4 years into depreciation when converted from rental to non-residential, does the 39 years start at that conversion, or is there 4 years of "credit" so then you have 35 more years to depreciate... thought I read that someplace but no time to research that.

Bill

[Gene V]

If you have the QF Depreciation Handbook, on page 2-11 and 2-12 is a section on Changes in an Asset's Use.
One of the paragraphs. If the recovery period is increased, depreciation is based on the remaining recovery period, computed by reducing the revised recovery period by the number of years the asset has been in use (computed under the applicable convention)