Basically, when the recipient of the property receives it, they will have a cost basis that is based on the FMV at the time the original owner passed (not the date the inheriting recipient's name is put on the deed.) and if they maintain it as rental property, they start depreciation all over from their "new" cost basis.
The original owner's suspended losses, as well as depreciation recapture are taken care of on the deceased's final 1040 tax return, the estate return, or if split, then a combination of both.
