How do I calculate depreciation on a partnership 1065 return for a rental house purchased 2016, converted to personal 1-1-17, and then converted back to rental 6.1.18?

[TBK4]

The house was ready to rent in Dec 2016 and depreciation was deducted. In Jan 2017 my son moved into the house and paid very little rent. I deleted the asset and no deductions were taken in 2017. My son moved out May 31, 2018. I advertised it for rent June 1 and a renter moved in June 18, 2018 and is paying full market rent.  

If I input with June 1 service date, TurboTax calculates special depreciation and there is no place to input depreciation deducted in 2016. If I reject the special depreciation, then I cannot take special depreciation on other rental properties.  If I input the original service date of Dec 14, 2016, then it calculates a whole year of depreciation, which is not correct.

How do I input into Business TurboTax so the depreciation on the 1065 return  is correct?

[Carl]

" my son moved into the house and paid very little rent."

That actually doesn't matter. Rent is rent - be it a little or a lot. But I do need more information before I can provide you accurate information that would be helpful to you.

 - Who are/were the partners in this partnership? Two people that were married to each other at the time the partnership was established? More than two people? What's the relationships (if any) between the partners?

 - Did/does this partnership have more than just the rental property? This matters, because if the property was converted to personal use and the partnership had no other source of income to report, then the partnership ceased to exist on the date of conversion to personal use. In such a case, a "final" partnership return was required, with final K-1's issued to all partners.

" I deleted the asset and no deductions were taken in 2017. My son moved out May 31, 2018."

So you mean to say that you have more than one year of rental income that was never reported to any taxing authority on any tax return?

[TBK4]

My husband and I (married) are the partners, along with another LLC that is also owned by us, so his use is attributed to us as our personal use. The partnership owns many assets, including several other rental properties. All of the other rental properties had net taxable income. There were no rental losses on the other rental properties.  Our son was unemployed and being supported by us. He was living there rent free, so I should not have said little rent. Because there was no rent, I did not take any deductions after 12-31-16 until he moved out and an independent renter moved in June 2018.

[Carl]

So basically, the property was never rented to anyone (family or not) until June of 2018? Just clarifying here to help you correctly handle depreciation.
" I deleted the asset and no deductions were taken in 2017"
Wait a minute. From which tax year did you delete the asset? If you took depreciation in 2016 which would have been rather small since the property was not placed in service until Dec of 2016, then on what tax year 1065 did you remove it from service? I also wonder how it was possible for it to even be on the 1065 for 2017 because if you reported zero days rented the program would have "forced" you to remove it from the SCH E.  I ask, because you can't possibly have reported it as removed from service on the 2017 partnership return, if you deleted it from the 2017 partnership return.
We'll get this, once I get on the same page as you and I "know" I'm on the same page. I've learned from past experience to not make assumptions, as when I have, they've been wrong 100% of the time.
Finally, do you have the IRS Form 4562 from the last partnership return the rental was reported on? You need the one that prints in landscape format that is titled "Depreciation & Amortization Report". I don't think we'll need the other one titled "Alternative Minimum Tax Depreciation", but if you have it, keep that one handy just in case.

[TBK4]

No, it was not rented to anyone until June 2018, but I did take a small depreciation deduction for Dec 2016 when it was available for rent, before we decided to let out son live there rent free in Jan 2017. I wish now I had not. Things would be simpler. Yes I have the 4562 from 2016. I should have reported no rent in 2017 and let TurboTax handle it. Instead I just deleted the asset off TurboTax so nothing was shown on the 2017 1065. There was no formal remove from service. Probably not one of my better ideas.

I have tried 2 ways on TurboTax this year. But neither one calculates correct. If I use the original 2016 purchase date, it calculates 2018 depreciation for the whole year, rather than June 1 forward.  If I use the June 1 service date, it calculates special depreciation at 50% on the appliances, which is not correct and ignores 2016 depreciation I did deduct and 2017 depreciation I did not deduct, but probably have to claim anyway. If  I decline special depreciation on this house, then I must decline it on 2 other rental houses that have legitimate 100% special depreciation for this year also, which I do not want to do.

The only other idea I have is to use the original service date of Dec 2016, input prior depreciation for 2016 (I deducted) and 2017 (I did not deduct). It will calculate 12 months of depreciation. I could use the prorated personal portion of depreciation as a non-deductible expense and show as an M-1 reconciling item.

Any other ideas?

[Carl]

For starters, since your deleted it from the 2017 partnership return, that means no depreciation on that property was carried forward from the 2016 partnership return. Additionally, I *highly* recommend you amend the 2016 partnership return and remove the property entirely. Since you have other rental properties, the drop in depreciation deduction will be so negligible that it won't make any difference in your tax liability. If it does, so what? You're only talking maybe $20 maybe if that much. Big deal. Just go online to <a rel="nofollow" target="_blank" href="http://www.irs.gov/payments">www.irs.gov/payments</a> and pay it. Then you're done with it and have simplified your life immensely.
So what if you pay a few dollars more for 2016 taxes? Big deal. I refer to such situations as "stupid tax". I've paid my fair share of stupid tax over the years, and have doubt that I will pay more in the future. But so long as you don't pay it for the same "stupid" thing, it's just part of our learning process.
Now when you amend the 2016 partnership return that means you'll be issuing two corrected K-1's. I'm extremely confident that amending your 2016 1040 joint return for those corrected K-1's will make absolutely no difference to the personal tax liability. In such a case, the IRS does not want you to waste your time amending your personal return for basically, "nothing". So just get the property off the 2016 return, file the corrected K-1's with your personal 2016 tax records (don't file them with the IRS) and be done with it.
From there, I'm sure you already know how to deal with what is essentially a "new" rental property in 2018 for the partnership.
As things sit right now, you did not "carry over" your losses from that property to the 2017 partnership return. So reporting the 2016 depreciation on your 2018 return for that property "will" raise flags. So that's why it's just easiest to amend the 2016 partnership return and remove the property entirely.

[TBK4]

Thanks!  I want to do whatever will be the least likely to raise flags.