reinstating a rental property

[midas]

I purchased a property through a 1031 exchange in 2005 and rented it 100% until 2008, after which it was not available for rent and used only for occasional personal use.    It was re-instated as 100% rental property in Jan 2023.

Twenty years into its depreciable life, I  was trying to use its cost basis as it was in 2008  ( about $15000) in the TT dialogue, but there seemed to be no question to indicate accounting for this 15 year gap in time. I am not sure when each question refers to "this" business - whether it refers to the newly re-instated one (eg Have you used this business 100% since you acquired it? since the answer is "Yes: for the periods it was available; but obviously "No, for the period it was not on the market. ).  If I answer the question regarding "date purchased or acquired"  with the 2005 information, it assumes I have been renting it since then. By using the 2008 cost basis as the price and entering the date of Jan 2023, I get what seems like the correct answer, but the process is wrong and it also starts the depreciation again at 27.5 years.

The temptation is to just assume it is fully depreciated and deal with the full amount of depreciation recapture whenever it is sold.

I would appreciate a suggestion how to navigate this.

[tagteam]

The facts you presented are fairly complicated in terms of previous transactions and mixed use of the property but the result in terms of the property being placed in service as a rental again in 2023 are seemingly fairly simple.

You would use the lesser of the fair market value on the date of conversion to rental use in 2023 or your adjusted basis. In your case, it seems fairly clear that your adjusted basis is going to be far lower than the fair market value so you would use your adjusted basis as your basis for depreciation.

[midas]

Thankyou -  I have read so many posts and publications and could find no reference for this situation. Your answer is my intuition and accurately reflects real calculations - but the ambiguity makes it seem not so "honest" when answering the questions,

So -  is it ok to use the date of Jan1 2023 as the "acquired" date as that is when it was reinstated as rental property

 - and not the actual date I purchased the property in 2005 - to use with this 2008 cost basis amount   ? All of the  like kind exchange information was properly reported at that time.

Thank you once again for your answer.

and to continue answering the questions:  again I have to assume this does not refer to the "original" business rental

1  a) I traded

    b) I purchased

    c)The item was sold, etc..or no longer being used in this business

    d) none of the above

2  Business use since I "acquired it"     yes - for "this" business ? or no - for the time I have owned the property?

[RobertB4444]

As long as you have documentation to back up your choices here then you're fine.

Jan 1 as the acquired date and 100% business use since acquired is perfect.

The basis at the end of it's prior rental life in 2008 as the basis to begin depreciating is also perfect.

Answer all of the questions as though you had purchased the property brand new for the 2008 basis on Jan 1, 2023.

Disregard anything about it's prior rental life.  You already took the depreciation for that and you're not trying to get away with saying you didn't.  You're doing everything right.

@midas 

[midas]

Thank you again....

just wish I had asked this question days ago before plowing through so much of the tax code!!