All Forum Posts by: Allan Ste

Steven,

Thank you for the response.

I believe I can achieve what you are saying, but would like
to seek some additional guidance on what to do about one item in particular.
The item on my 4562 form that has historically represented the
rentable 'unit' of the property since I've owned the property. I say 'unit' , because at the time of purchase only one unit was rented/rentable (therefore
depreciable) and the other unit was owner occupied. The historically
rented unit is about 60% of the sq ft of the entire dwelling so is
somewhat larger. For the first few years of ownership I had someone
prepare the taxes before I picked up on how the taxes work.
Initially when we started the depreciation on the rented unit, the preparer entered a figure of about 90k, (I paid 185k for the entire property) and put it at 100% of business use. Again this represented, to my understanding, only the rented unit at that time, minus the owner occupied unit, and minus the land value. I checked with the preparer recently and this was his understanding as well. Fast forward to Aug 2011, the 2nd unit is now rented (formerly owner occupied), and I now believe I should be depreciating some amount that represents that unit. At this point should I proceed by entering a new line item on 4562 for that unit, at 100% business use, with a 'Date placed in service' of Aug 2011, which has a new 'cost or other basis' amount that represents that unit? I think that if it were done according to your recommendations all along, we would have started the first unit out on form 4562 years ago with one Basis amount that represented both units, but would have put the Busines use percent at something like 60% (?). Can you comment on what you might do in this situation?

Thanks again for your help.
Allan

Steven,
Was just trying to communicate directly and efficiently so as
not to waste anybody's time. Sorry about that.

As to your favor of option 1, can you elaborate a bit and/or say
anything as to why it would be favorable to option 2? After I
finished typing my post above the other night, I found myself logically going toward option 2 more, since it seemed cleanest, and it allowed for a complete separation of the assets consumed by each tenant, in order to track the depreciation independently of one another.

At this point, I know I can make the final depreciation amounts
come out the way I want them to, however what I was confused about is,
what is the most acceptable practice in the industry for achieving that?
Reason I bring this up is, I have a few improvements that fall in this
category, ie, a garage, new driveway, and a privacy fence. The other assets
that I track all either align 100% for one unit or the other completely.

As for option 2, using the garage example,I imagined that I would create 2 lines on the form 4562 for the same physical asset, but that each line item would have its own 'date placed in service' and each would be placed at 100% 'investment' use percentage, and each would depreciate independently of one another, each on its own time table (i.e., both at 27.5 years, but that each asset was placed in service at different times).

Also, along these lines, a previous tax preparer recommended that I might treat each rental unit of the duplex as its own property, since each was placed into service at different times, and thereby (I assume) be represented as such on Schedule "E" in columns A and B respectively (ie, Property A= initially rented unit, and Property B=newly rented unit as of Aug 2011). In your opinion, do you think it would be best to separate the expenses and depreciation (and rental income for that matter) for each unit in separate columns on Schedule E as such?

Thanks again for your help.
Allan

Wasn't quite finished with the post and it created by itself....

Just to finish, I'm open to suggestions by others on how to handle these 'in-common' assets , as far as depreciation goes.
Please do not suggest to seek tax help from a paid professional. That will definitely not be an option. I had a professional do the taxes for the first couple of years and believe I am capable to do it myself. Also , please do not recommend to buy tax software, as that is not an option either. I'm doing the taxes myself be it right or wrong so please spare the recommendations if they are for either of the above.

Thanks in advance for any help!

Hello,
Was wondering if I could get some guidance from someone who may have some experience with depreciating rental property, specifically for tax purposes.
I have owned a duplex since 04 and have owner-occupied it. The other unit was rented out, and I've been depreciating the portion of the property that is r ented, as well as improvements I've been making so far. I originally had a preparer do my taxes for the first couple of years, but being the individual I am, decided to figure out the taxes myself. I've so far gone 2 years doing the taxes myself with no issues and have kept accurate records of all expenses, as well as how my assests are depreciating each year.
Central question I had was related to my conversion of an owner occupied situation to a fully-rented situation. The unit I occupied became rented in Aug2011, thereby making the entire property fully rented. I will now start depreciating the unit that went into use in August. Question I have is, how do I handle assets that are now 'in-common' between the 2 units, which are currently being depreciated, for example, I build a garage in 2007, 50% of which is going toward deprecication, and now, beginning in Aug 2011, I would like to indicate a full 100% depreciation.
Options I am exploring are:
(1) moving the garage from "Property used 50% or less in a qualified business use" on my form 4562 up to the section for 'Property used MORE than 50% in a qualified business use' section and set it to 70% , since the garage was effectively used for 70% of the year for a full business use, and recalculating a new 'basis for depreciation' amount on that line. Note , with this option, I imagine I can move from 70% to 100% on my taxes for year 2012.
Option (2) that is coming to mind is, make an additional new line item on a 4562 form that represents the garage (again), and indicate the amount that is available for depreciation and put it in the 'Property used more than 50% in a qualified business use' section.