Do we include land value for depreciation of schedule E rental property or solely acquisition cost e.g. attorney/CPA fees? Inherited ranch property via trust transfer.

[cardwellj]

Property primarily is ranchland with water well, generates modest rental and royalties.

[Carl]

Land is not depreciated. But when it comes to acquisition costs (would seems odd if the property was inherited, yet it's not impossible of course)

 - Those costs associated with acquisition of the loan of amortized and deducted (not depreciated) over the life of the loan. I'm guessing this is not your situation at all, with inherited property.

 - Costs associated with acquisition of the property are added to the cost basis of the property and depreciated over time. Generally, the depreciation time frame will be 27.5 years, since those costs can just be added to the existing cost basis.

[ColeenD3]

The land itself is rented? No, land is not depreciable, but the well might be if that is a business expense.

[cardwellj]

Read IRS info saw small blurb land not depreciated, but that point isn’t highlighted or expounded! In examples cost of property used, but we didn’t “pay” for property and that lead to my specific question about land value.

Regardless we incurred few thousand in professional fees to transfer property into our names with county and decedents CPA assisted with royalties sorted out directly into our names. Believe we on solid ground to claim those costs but needed an expert to weigh-in.

Bless you for clarification.

[cardwellj]

You’re helpful answer leads to another twofold question:

How would I value a water well several years old for depreciation purposes when it also furnishes water to our ranch house adjacent to ranch property, i.e., personal use involved?

[ColeenD3 · Accepted solution]

If it is only several years old, you may still be able to find out the cost. You would also need to know if the previous owner was already depreciating it. You would prorate the expense depending on how much use was personal and how much is business.