I had the following bookmarked.
"All costs of upgrade, capital improvements, etc, will be added to the original purchase price to determine gain or loss."
Treas. Reg. §1.1016-2 Items properly chargeable to capital account.
(a) The cost or other basis shall be properly adjusted for any expenditure, receipt, loss, or other item, properly chargeable to capital account, including the cost of improvements and betterments made to the property.
"Yes, there is depreciation for the portion of the year a rental is in use before the date of sale in any year."
Treas. Reg. §1.167(a)-10 When depreciation deduction is allowable.
(b) The period for depreciation of an asset shall begin when the asset is placed in service and shall end when the asset is retired from service. A proportionate part of one year's depreciation is allowable for that part of the first and last year during which the asset was in service.
"There is no depreciation on a property that is bought and sold the same year."
Publication 946:
Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property.
Finally, if houses are "flipped" on a regular and consistent basis in the ordinary course of business, the houses are considered inventory and, as such, are not allowed a deduction for depreciation per Treas. Reg. §1.167(a)-2
