It referred to the instructions that improvements made after purchase should be added in the “improvement value” which would have actually made the software miscalculate the 30/70 land/improvement value percentages.
Exactly. That's why I say to enter any property improvement done "at any time" after your initial purchase of the property, as a physically separate item in the Assets/Depreciation section. For others reading this:
Say you purchased a property for $100,000 and 30% of that is for the land. That means that $30,000 is allocated to the land and is not depreciated. Not ever. The $70,000 value for the structure is what gets depreciated over time.
Now lets say immediately after you purchased the property you paid $25,000 for a new roof. If you include that $25K in the original purchase price, that makes your cost basis $125,000 now. So far, so good. But the problem arises when the program allocates 30% to the land. That's $37,500 that is not depreciated, and only $87,500 to the structure, and that $87,500 is what gets depreciated. That's not really right.
If 30% of your original purchase price is $70,000 and you paid $30,000 for a new roof, then that should have no effect what-so-ever on what you paid for the land, and your structure value should be $95,000 that gets depreciated.
If you enter the roof as a physically separate asset, then the program will correctly depreciate the full $25,000 you paid for that roof, and also still depreciate the $70,000 you paid for the structure.
