As a scientist and mathematician not an accountant, my reply needs to be vetted
The conversion to personal use a day before LLC formation is an excellent idea.
I thought using the depreciated-to-date basis was good despite the reduction in future rate of depreciation (time is money) until I found this in the 1065 instructions:
"Property Acquired in a Nontaxable Transfer
You must depreciate MACRS property acquired by a corporation or partnership in certain nontaxable transfers over the property's remaining recovery period in the transferor's hands, as if the transfer had not occurred. You must continue to use the same depreciation method and convention as the transferor. "
Thus, if I use the original SCH E cost on Line 19h (residential rental property) of Form 4562 and enter the prior depreciation in the next to last column (labelled "prior depreciation") on Form 4562 Depreciation and Amortization Report worksheet, then the math works and above paragraph is followed. Presumably, someone will notice when sum of prior and current depreciation equals the cost and stop the depreciation.
However, TurboTax will not allow me to enter the prior depreciation in said space. So I labelled the asset "house full depreciated in June 2039" to remind someone to stop the depreciation in June 2039 if either my wife or I are still alive then. More likely, inheritance ends the depreciation.
I think this technique would apply to a 1031 Swap too with an additional asset entry for difference in cost between old and new house.
The key concept is the space labelled "prior depreciation." Please comment. Jim
