My husband and I purchased a foreclosure late in 2015 for $220.5K and over a 3 year period we put about $40k into remodeling it to turn it into a rental in July of 2019. My question is how to determine the cost basis of the property for depreciation for our 2019 taxes?
I know we deduct the cost of the land (at the time of purchase?), from the total cost of the property (including improvements) to determine a cost basis, but how do we know what the fair market value was when we purchased it in 2015 since it was a foreclosure? Also, do county assessed values at the time of purchase reflect a fair market value for the land?
Since it became a rental in July of 2019 do we use that year's FMV as our cost basis instead of the purchase price? Confused!!
