Darn! I was hoping for at least a split on the 4562. Oh well. Here's a gist of the process, which I'll be happy to walk you through if you like. I am also assuming a 50/50 split of all expenses and depreciation between the two units. If the actual rental income is different for each unit, that really doesn't matter. It's the expenses, depreciation and property taxes that I am expecting (hoping) is a 50/50 split. (or will be 50/50 once this process is completed.)
Start by entering the property so that you report it exactly as it was reported on your 2019 tax return. Take note that you will only enter rental income received from both units up to the date the renter moved out of one of the units. You'll be converting the entire property to personal use, one day after that renter moved out. So make sure you read every word on every screen so that you make the necessary selections.
You will also need to prorate your mortgage interest and property taxes. Make sure you do "NOT" elect the option to have the program do the splits for you. If you do, then because of your unique situation, the program will not so those splits correctly in the end.
If you show a conversion date of July 31, 2020, then you'll be entering 7/12 of the property taxes paid, and 7/12 of the mortgage interest paid. Don't worry about the depreciation. The program will take care of that for you, based on the date you convert it to personal use.
Next, you will enter an entirely new rental property with an in service date of Aug 1, 2020. This is where the math you need to manually perform comes into play.
As you enter the property in the Assets/Depreciation section, in the COST section you need to figure the correct number to enter here. This is your formula for getting the correct number.
Look at the 2019 form 4562, Depreciation and Amortization report.
1/2 of the amount in the "cost (net of land)" column, plus 1/2 of the amount in the "land" column. Add those two amounts together.
Now subtract from that total 1/2 of the amount in the "Prior Depreciation" column and write down the new total.
Finally, subtract 1/2 of the amount in the "current depreciation" column, and enter theis final total in the COST box in the TTX 2020 program.
Next, enter 1/2 of the amount in the "land" column, in TTX 2020 "cost of land" box.
With this setup, you've taken into account the prior depreciation already taken on the unit that will remain classified as a rental. Additionally, since this is a change in status, depreciation will start all over for the unit that remains a rental, based on the reduced cost basis you just figured.
Also, still assuming a 50/50 split, this will be the cost basis of the unit you live in now, should you ever sell it, convert it back to a rental in the future, or if you tne owner of that unit should die.
In the end, you will have two entries on the SCH E. Column A will show the duplex consisting of both units being rented out up to July 31, 2020. Column B will show only a single unit being rented out effective Aug 1, 2020.
