ADU

[noah10]

Hello,

In 2023, we completed construction of ADU as separate rental property on pre-existing rental property.  I'm wondering how I enter the cost basis in turbo tax?  When it asks if you purchased this property, if I say yes then it asks me for purchase price and then all the charges you'd have on settlement statement, which we do not have in this case. I guess I would just leave all that blank? Then it asks me for land and improvement value. Would I just use the same ratio which has been on the property tax statement for the main house?

otherwise, if I say no that I didn't purchase the property and acquired it a different way (constructed), then there's not really a logical choice for that. So, can you confirm that I would say I purchased it?

[DianeW777]

Yes, you definitely check that you purchased the property. The date of purchase is the day it was available for rent which is essential the 'date placed in service'. It's not necessary to remove or change the land that is part of the original rental property, assuming you will not sell the home or accessory dwelling unit (ADU) separately.  

Simply leave the land blank on the ADU.  You can use the description as ADU instead of a capital improvement, it will have the same depreciation attributes that it should have which is 27.5 year, for residential real property.