I've looked all over irs.gov and find nothing that addresses this specific issue. However, on the screen that asks how I acquired the property, I select "gift" and continue. Then I'm informed I need to gather the following information:
- Date the donor (not the recipient) placed the property in service
- Fair Market Value
- Donor's (not recipient's) depreciation schedule
- Gift tax paid if any (not common)
Now this (to me) seems to insinuate that my in service date will be the same as the giver's, and that I also receive the giver's prior years of depreciation. I also note that the program does not ask for the giver's cost basis. It only asks for the FMV (at the time the gift was given I would presume) and that FMV would be my cost basis. However, that does not appear to be the case as addressed in the next paragraph below.
When I get the assets/depreciation section and start entering the asset, under the "learn more" link for the cost it states, "Gift property. The cost is the same as the adjusted basis for the person who gave you the item as a gift." So my cost basis would be the same as the donor's cost basis (or 1/2 of that in this case.)
For "date purchased or acquired" it's not clarified, as there's no "learn more" link for that one. However, this would be the date of the gift, as the date entered here has no effect on depreciation.
On the next screen it asks for the "in service" date. Here you enter the date placed in service by the donor/giver, and it's perfectly okay for that date to be prior to the gift acquisition date. This "in service" date is insinuated from a prior screen that tells the recipient they need to have to donor's in service date. The program will figure the prior year's depreciation based on the date placed in service by the donor, along with the current year's depreciation.
Take note that I tested the above "as if" the entire property was gifted to me. It would appear the program can not correctly handle a partial gifting of rental property unless all the math is done manually. You can also just cut everything in half and treat/enter that half as 100% ownership and the program will do everything automatically then.
