Hi, I'm stumped on this one: I sold 1/2 of my investment property to my friend in Dec 2020. I have a small capital gain as the property was purchased in July 2018 and appreciated slightly over the past 2.5 years.
How do I recapture the depreciation? Do I just split the amount of depreciation already taken since I only sold half of the property at this time? Or do I simply pay taxes on the capital gain for tax year 2020 and then recapture the depreciation taken after the entire property is sold? My partner and I agreed to hold the property and continue to use it as a rental for at least 2 years. Who knows when we will sell... could be in 2 years, 5 years, 20 years, etc. It depends on the rental market and our own personal circumstances in the future.
Can anyone help? I looked at the IRS publications but couldn't determine the answer.
