How is the deduction for Depreciation handled

[Bret Clayborne]

On a buy and hold rental property the purchase price was less than the value of the land itself.  How is this accounted for taxes purposes (i.e. Depreciation) j

[Logan Allec]

@Bret Clayborne "On a buy and hold rental property the purchase price was less than the value of the land itself."

The rule is that your purchase price should be allocated between land and building in the same ratio as the value of each component bears to the value of the property as a whole.

So let's say the property is worth $100,000 with $60,000 of the value attributable to land and $40,000 attributable to building (you can use any reasonable method to determine this; one easy way used by many is the assessor's split, though there are other methods that could yield a better answer for you).

You buy the property  at a huge discount for $10,000.  $6,000 would be allocated to land, and $4,000 to building.