What if I transfer the rental property to my child and they live in it. The rule of living in it for 2 or more years should apply and there would be no capital gains taxes paid upon sale of the property but still need to pay depreciation taxes?
For example:
Home fully depreciated at $200k (depreciate more than initial cost due to start date of rental and start value at time was $200k)
Initial cost of home: $150k
value when gifted to child: $400k
Child lives there for 5 years and sells it for $500k
So, the child needs to pay the $200k depreciation taxes (passive income tax rate) but does not need to pay the $350k capital gains tax. Is this correct?
