KrisD15
Expert Alumni

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If the property was being used as a rental starting in 2014, but you and your sisters did not get ownership until 2020, the basis for each sibling would be the Fair Market Value on the date you each gained ownership less the depreciation taken (or should have been taken) up until that time. 

 

If you then continued to use it as a rental, your basis will need to be adjusted for the depreciation you took or should have taken.  Base that depreciation on your basis, which would be one-third the Fair Market Value when you gained ownership less one-third the deprecation for 2014-2020. 

 

The depreciation for the period before 2020, if at that time it was only owned by your father,  would have been based on the cost value/basis of the purchase price your father paid or the Fair Market Value on the date the property was put into service, whichever was less.  Since you did not own the property, you reporting the Schedule E was not quite the proper way of reporting the rental activity. If you did not own the property, you could not have claimed the depreciation at that time. Technically, your father should have been claiming the rental until 2020. You could have reported income for managing his rental.

 

So for example,  if the Fair Market Value on the date you and your two sisters gained ownership was 325,000 and 25,000 depreciation should have been taken from 2014-2020, you each would have an adjusted basis of 100,000.

If you rented it out from 2020-2024, and should have taken 15,000 depreciation, your adjusted basis for the sale would be 85,000 and your sisters' would be 100,000.  

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