It depends. To arrive at the cost basis for the apartment only, you should first use the city or county tax assessment to determine land and building portions. Next, take the square feet of the apartment and divide it by the total square feet of the home. This will be the business use percentage to use against the total cost of the building
Add all costs of purchase, original purchase price, improvements that have been done to the entire property before you began to prepare the apartment for rent. - I would leave the land alone and not enter it for the apartment in the rental asset.
If you have capital improvements that are strictly for the rental apartment you will add that as a separate asset. If it affects the whole house then you will use the formula above to arrive at the apartment percentage.
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