Does turbo tax maintain my old depreciation schedule if I change my percentage ownership?

[jchewy10]

I have owned a rental property for about 10yrs.  Last year I gave 50% of the ownership to my mother as payment for her original down payment for the rental.  I have gone to the county and officially recorded it.  

My question is for 2022 taxes I want to reported 50% ownership instead of 100% ownership.  How do I properly do that and move over all the depreciation I have taken over the past 10yrs?

Additionally since my mother now owns 50% of the property, when she reports her taxes does her depreciation schedule start from 10yrs ago or now? 

[Mike9241]

I think what you have is a complicated situation - possibly part sale - part gift that is covered by Reg 1.1015-4

the sale part would be the value of her down payment the gift part would be the excess of the FMV of the property above the sale part.   this affects you and her.  in addition, if that down payment was a loan, she may have been required to to report imputed interest income each year. 

others may have a different opinion 

[Carl]

I have owned a rental property for about 10yrs. Last year I gave 50% of the ownership to my mother as payment for her original down payment for the rental.

So you paid back a loan (with interest, weather actual or imputed) from your mother, with equity in the property. That alone negates the need for me to go any further really, as you "need" professional help to handle this correctly. But to answer your question on ownership percentage:

With the TurboTax program, if you change the ownership percentage "or" cost basis of any depreciable asset, that will also change the depreciation history. This means your current depreciation and all future depreciation will be wrong.  Every year.

You seriously need to seek professional help with this. This is expecially true if your state taxes personal income, as doing things wrong can become a double-whammy when you also pay state taxes.

Additionally, since your mother owns 50% of the property, she may need to start reporting it on her own tax return every year.

[tagteam]

I agree with @Mike9241; this scenario presents as a transfer in part a gift and in part a sale (the presumption is that the FMV exceeds the balance of the loan), which is controlled by Treas. Reg. §1.1015-4. This issue would not have arisen had you simply paid the loan back in cash, but you transferred property in exchange for loan being retired, essentially selling a 50% interest in the property.

You need professional guidance here because you may need to recognize gain (including depreciation recapture) on this transfer, your basis and your mother's basis will almost certainly differ, and your reporting for the rental going forward will change. It would also be appropriate to draft a quitclaim deed granting 50% of the property to your mother (most likely as tenants in common, but that's another discussion).

The yield here is that consultations (for you and your mother) with local tax and legal professionals is necessary for various reasons.