Investors & landlords

Hi Mike,

Thanks very much for your response. I fear in my attempt to simplify the situation I may have caused you a lot of additional work, though your response is truly appreciated. Since you were kind enough to provide all this input I'll try to clarify as the actual concern I have is still about how to input this data into TT.

On original purchase the property was titled both to myself and my parents. I actually lived in the property, provided all the payments, upkeep, maintenance, and essentially 100% of all operating costs.  It was for my sole usage and the mortgage was in my name alone. But because my parents provided some assistance with the original down payment the property was titled 1/3 to me and 2/3 to them (with their 2/3 being community property TIC). At that point the overall basis in the property was the composite of 1/3 of each of our (equal) basis.

Fast forward several years, I eventually moved out of the property and turned it into a rental unit. The basis had not changed and thus 27.5 year S/L depreciation was taken based on the building value of the overall composite property basis using the county assessor's 50:50 land to building valuation. However I was still providing all the operating expenses and doing 100% of maintenance and also receiving 100% of the rental income, thus this was NOT a partnership and schedule E data was only reflected on my 1040, as suggested by my cpa at the time.

When one of my parents died last year, the other automatically received a step-up in basis to the value of the property at the time of death. Typically you would be correct in stating that heirs get a step up in basis but in this situation the immediate next heir was my surviving parents, the spouse who was also a co-owner of the property (2/3) in a community property state. In my state the surviving spouse then automatically gets not only the deceased spouse's basis stepped up, but his/her own basis in the same community property as well. So 2/3 of the total unit's basis reset (both parents, one still alive) while 1/3 (my original basis) remained the same. I have separately tracked the unadjusted (without depreciation) and adjusted (with accrued depreciation) for each of the title-ownership components of the property.

Because of death last year, the depreciation which was allowable and should have been taken during the year of death was actually higher (basis went up significantly due to the death) than what I actually took on last year's tax return on schedule E - at the time I was not aware of any of the information and was still helping my surviving parents deal with the aftermath of the death. It was only after speaking with both an appraiser and another real estate cpa that I realized the above basis issues and did the calculations to determine what

the new depreciation moving forward should be and what this year's temporary extra depreciation should be.

So that's a long winded way of saying that I still need to manually override the property basis and the 27.5 year s/l depreciation for this year and all subsequent years *and* also add the depreciation I should have taken last year above the baseline to this year's return only. Frankly in either case I'll be way in loss territory for this property and will be carrying forward 100% of the loss to future years whether or not I take this "extra" depreciation or just use the new S/L values moving forward. But I'm trying to correct everything such that on Jan 1 of 2021, the total accrued depreciation and adjusted basis will be correct for what it *should* have been had I properly done all of this on the year one of my parents died in 2019.  And then 2021and beyond will be a straightforward continuation of the S/L depreciation.

So with that lengthy explanation I'll try to focus back on the specific questions I have for the forum:
- how do I manually override and change a property's basis and land ratio for a current year to reflect a change from the prior year (as the new total basis has changed and the land to building ratios updated by the appraiser)?
- how do I manually override the calculated depreciation which TT would spit out based on building basis to "add back" depreciation I should have taken in prior years?

Neither of these two features can be done in the step by step automated version of TT. A bit of additional reading after posting my original message suggests something in the "forms" settings may allow me to override this, but I wanted to check the forum first as it's my first time messing with the forms settings.  I know what the numbers should be, just not where/how to input them.

Thank you all for your consideration and hope everyone is having a great holiday.