Calculation of Cost Basis in Turbotax

[John Corretti]

Below is an excerpt from a Rental Property Cost basis worksheet taken from Turbotax. Basically they took the amount I paid for the property $83k, then added in some loan costs, plus $2k in Capital Improvements. Then I entered some information from tax records to separate out the land value. My question is this: Why is Turbotax prorating the Capital Improvements by the Land/Improvement Percentage? Isn't that all depreciable basis?  Did they do this calculation correctly?

[Eamonn McElroy]

@John Corretti

You don't get to pick and choose.

Financing (loan) costs are amortized over the life of the loan.  Other acquisition costs are either expensed or capitalized into the basis of the building and land.

"Yeah those Capital Improvements were all on the building. So is Turbotax taking a simplified approach here in prorating it?"

No, TurboTax is taking the incorrect approach here in prorating improvements after acquisiton to land and building.  As @Basit Siddiqi has said, you'll probably have to add the improvements as a separate asset to get it to calc correctly.

Alternatively, may be able to expense the $2k of capital improvements as de minimis depending on the facts and circumstances.