If any CPA or someone that had similar experience could comment:The IRS understands the ownership of a property as the day of the death or the day of distribution?

The IRS is willing to leave it's tax in but they require that you leave all of your profit in.

:How could 'the IRS' tell what money was used for what thing?

"Filing a large claim for a refund on an amended return will almost always cause an audit," according to a former IRS attorney. https://www.taxprotoday.com/news/raise-your-hand-if-you-want-your-taxes-auditedThis is something I have been telling investors forever.

IRS Pub on Depreciation gives you extensive guidance on how to use the depreciation schedules to determine the exact percentage depreciation for the first year your property is in service. 

@Ron Todd Publication 523 of the IRS. 

Hi there Are any of you living off your your real-estate portfolio without having any traditional IRA/401k's?Thanks

@Clay W.There are multiple options that the tax courts/IRS has deemed appropriate to allocate tax basis to building/land.

Although you don't have any "US" income, you have "income" and your worldwide income is subject to tax according to the IRS which I'm assuming you've been reporting on Tax Form 2555 each year.  

However, the IRS will see that I've claimed expenses and depreciation for my replacement property on form 1040, even though I didn't "acquire" it til 1/3/19.