Thank you! That answers my question.
I have a follow up question that maybe you can help me with. This investment property I speak of is a shotgun double (duplex) and I lived on one side. I understand I need to treat each unit differently, one is personal, the other investment. Over the years, I depreciated the property (not land) as a proportion of the square footage of each unit's living space. I also kept records of all the improvements where a majority of them were for the unit where I lived. Can I simply add up all major improvements for both units and add that to the purchase price to increase my overall cost basis, and then proportion up the rental's cost basis after that? (Add of course make sure I am recapturing all of the depreciation)
For the improvements that were unit specific, and not for the entire property, I just don't think it is fair to apply those independently to each sides cost basis, because the both units are sold together at the end, with no way of knowing how the overall sale price was effected by one sides renovations. If that makes sense.
