This is my parents' home that has been turned into a rental because my dad passed away and my mom is living with us.
Falls perfectly in line with one of my sayings; "If it was easy, you did it wrong." 🙂
this is not inherited property.
It kinda/sorta is, as your mom inherited your dad's share when he passed.
I assume you are entering this on your mom's return, since she now owns the property. So there is a step-up in basis for your mom. How much of a step-up depends on if the property/mom's resident state is a community property state or not.
If a community property state, then you mom gets a full 100% stepped up basis of the FMV of the property on the date of your dad's passing. Otherwise, she gets to add 50% of the stepped up basis to her half of the original cost basis.
The community property states I'm aware of are : Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Now, in the tax year you convert the property from personal use to a rental, once you have determined the cost basis (at this point, I assume you have) you can use the most current tax bill for figuring what percentage of that cost basis to assign to the land. Typically, the land value will fall anywhere from 20% of the cost basis, to 30% of the cost basis. Depending on location it could realistically be an even higher percentage.
I know where I live in North East Florida, for property west of U.S. Highway 1 the land will be approximately 20% of the cost basis. Whereas property to the east will have closer to 30% allocated to the cost basis, depending on how close to the beach it is. Property that is "on the beach" will typically have 30-35% of that cost basis assigned to the land.
So while you can't use your most recent tax bill "as" the cost basis, you can (and should) use it to figure what percentage of your cost basis gets assigned to the land.
Also, be aware of how you enter the data on the screen that asks for COST and COST OF LAND. I only point this out because I've seen a fair number of people enter the wrong figure in the COST box after following the "example" in IRS Pub 527.
COST - The cost basis of the property including the value of the land.
COST OF LAND - The cost basis of the land.
The program (not you) will "do the math" to figure the cost basis of the structure for depreciation purposes. So you only need to figure and enter the cost basis for the land. At no time will you the user enter the cost basis of the structure only.
