Investors & landlords

Yes, we can help with the answers to your questions. The questions will be answered based on your order above.

1. You do not have to recapture the home portion.  There was never any depreciation allowance on the entire section of your home that was used as your personal residence.  This does not include any portion where depreciation has been used as an expense for renting out either the basement or the second floor. You must account for the basement bedroom percentage as well just like the upstairs apartment.
2. Appliances.  Any appliance that was junked because it was no longer functional and had to be replaced, would not have a sales price attached to it.  Those appliances would not have depreciation recapture because there was nothing to sell.  If you allocate a portion of the sales price to any appliances that are still functional and active then a small portion of any depreciation for the current appliance(s) would taxable as ordinary income.
   • Sales price and sales expense allocation:  Use the original cost of each asset listed on depreciation, add those together then divide each one by the combined total to find the percentage of the cost for each asset.  Use that percentage times the sales price and sales expenses to find the selling price/sales expenses for each asset.

      

     Example:  Original Cost (of each asset on your depreciation schedule, include active appliances to your list)

     $10,000 Land                = 13.33% 

     $50,000 House              = 66.67%

     $15,000 Improvements  = 20%

     $75,000 Total                 = 100%

     4. If you filed jointly with your first husband, you must recapture any depreciation used on the tax return during the early years of rental (1990 - 9/2009).  Then, you would add this to the remainder of the depreciation expense that you used from the date of death forward on the stepped-up portion of the house for the half you inherited.