I understand your confusion. When you purchased the property but you can do this. Breaking out the land is a concern.
First, determine the cost basis. How do you determine the basis of a rental property?
The cost basis for rental real estate is your acquisition cost (including any mortgage debt you obtained) minus the value of the land it's built on. If you paid $200,000 for a duplex and the land is appraised for $50,000, your basic cost basis is $150,000. Plus the cost of any capital improvements made over the years.
Land value had to be determined by you, based on the value of the property when you acquired the property. If you say you purchased the property for $100,000.00 and the value of the land at the time was $10,000.00 then the cost of the building would be $90,000.00 and the land would be $10,000.
Use this IRS lin for a publication on Rental Property: Rental Property - IRS
@ksrph
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