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alexulb
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How To Correct Rental Property Cost Basis and Depreciation Errors?
My 88-year-old mother’s past tax returns contain errors in the cost basis and depreciation of her residential rental property. I asked the IRS Email Tax Law Assistance as to how to correct these errors. They replied that my tax law questions are beyond the scope of their assistance and that I should consult with a private sector tax professional. Below are the facts of the case and my questions.
Case: My parents jointly purchased the 2-flat residential rental property 32 years ago for 30K. They used 50% of the rental property as their personal main home. They allocated 50% of their joint cost basis as the basis for depreciating the rental portion over a 33-year recovery period. When my father died 12 years ago, as the surviving joint tenant, my mother became the sole owner of the property. Based on the common-law state estate tax code, my father’s share of the original cost basis was stepped up to 50% of the 190K FMV at the time of his death. The main question that I have is whether the amount of the father’s stepped-up cost basis should have been added to my mother’s cost basis for depreciation purposes. If so,
Q: How do I correctly report the stepped up cost basis retroactively?
Q: Does the stepped-up cost basis start with the date of my father’s death, and what is the new recovery period?
Q: I understand that we cannot recover the depreciations not taken, but can we amend the tax returns for the past 3 years?
Q: If my mother were to sell her house this year for say 275K, is she entitled to the full 250K capital gain exemption or is the exemption less because 50% of the property is considered “residential rental property.”
I will appreciate any help in this matter. Replies may be e-mailed directly to [email protected]. Thank you
My 88-year-old mother’s past tax returns contain errors in the cost basis and depreciation of her residential rental property. I asked the IRS Email Tax Law Assistance as to how to correct these errors. They replied that my tax law questions are beyond the scope of their assistance and that I should consult with a private sector tax professional. Below are the facts of the case and my questions.
Case: My parents jointly purchased the 2-flat residential rental property 32 years ago for 30K. They used 50% of the rental property as their personal main home. They allocated 50% of their joint cost basis as the basis for depreciating the rental portion over a 33-year recovery period. When my father died 12 years ago, as the surviving joint tenant, my mother became the sole owner of the property. Based on the common-law state estate tax code, my father’s share of the original cost basis was stepped up to 50% of the 190K FMV at the time of his death. The main question that I have is whether the amount of the father’s stepped-up cost basis should have been added to my mother’s cost basis for depreciation purposes. If so,
Q: How do I correctly report the stepped up cost basis retroactively?
Q: Does the stepped-up cost basis start with the date of my father’s death, and what is the new recovery period?
Q: I understand that we cannot recover the depreciations not taken, but can we amend the tax returns for the past 3 years?
Q: If my mother were to sell her house this year for say 275K, is she entitled to the full 250K capital gain exemption or is the exemption less because 50% of the property is considered “residential rental property.”
I will appreciate any help in this matter. Replies may be e-mailed directly to [email protected]. Thank you