Help with tax estimate related to rental property sale

[Adam Cassis]

My wife owns a rental property that we plan on selling in the near future, ie coming months.

It is a complex situation, but I am having a hard time coming up with the cost basis of the property, estimating the depreciation, which will ultimately give me an idea of the tax bill due at conclusion of the sale.

first, the property was purchased (~1988) with what sounds like a lease purchase agreement by her parents (close family member bought the house, parents made lease payments over time with eventual outright purchase of the home from close family member). in 2008, they move into new home but keep as rental. shortly thereafter, second mortgage made on home to cover costs due to family business that eventually went under. Parents did not have income/money to cover property. to avoid foreclosure, my in-laws asked my wife for financial help. the house was refinanced in 2011 by my wife who had the deed transferred to her name at that time. we have been managing this rental remotely since that time. Property is in CA, we live out of state. With that said, how the heck is a cost basis established? at the time of the original purchase by the close family member? completiong of lease purchase agreement by her parents? or when she refinanced and had the deed transferred to my wife's name?

second question i had was how is depreciation calculated on a rental property. i understand the structure only is depreciated and not the land. but what is the "land basis" used? ie would i go to the assessor website and see the current value of the land in 2022 to calculate or the value of the land when purchased? for example, if land was worth 200k (by county assessor in 2022) but apprasied at 50k at time of purchase in 1988, which number ultimately gets subtracted from the final sale price to calculate the capital gain? 2022 (current est) or 1988 (original est)?

Third, what state capital gains tax rate is used? the state in which the property is in (CA) or the state which we reside (MI)?

Also how is the net investment income tax calculated on the sale?

although this property may ultimately be 1031'd, the split in equity in the house between my wife and her parents makes the sale quite messy. we feel like we need to divvy up the proceeds in a manner where we would have to assume the tax bill since legislation can always change and the 1031 benefits and step up in basis at death isnt always guaranteed.

Thanks!