It depends. There is really no hard and fast rule to determine how to allocate a sale of the roof but I may have a couple of guidelines for you to determine an equitable way to allocate a ratio for your rental house and improvements.
- Account for all of the cost basis for the rental house and each improvement and list them separately on a piece of paper. Add them all together to form a total basis and then determine a ratio for each asset. For an example, to determine the roof, you would allocate by: basis of the roof/total basis for all assets.
- Once you determine the ratio, you can use this same ratio to determine what percentage of the total proceeds is to be applied to the roof.
- Use this same application for each of your assets.
[ Edited 02/15/22| 01:14 PM PST]
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