The original purchase price was $180k. I refinanced a year later at $240k, pulling out $20k cash. The closing costs/fees were $3k. Can I depreciate the added value/cost of the property as an additional asset ($37k, which is $240k-180k-20k-3k)?
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Putting a larger mortgage on a property in no way adds to either the cost or the value of the property and in no way affects the basis in the property unless some amount of the additional amount borrowed is used to pay for an addition or improvement on the property. If some amount of the proceeds was used to to pay for an addition or improvement then you use the amount actually paid for the addition or improvement as the increase in depreciable cost.
Tom Young
Putting a larger mortgage on a property in no way adds to either the cost or the value of the property and in no way affects the basis in the property unless some amount of the additional amount borrowed is used to pay for an addition or improvement on the property. If some amount of the proceeds was used to to pay for an addition or improvement then you use the amount actually paid for the addition or improvement as the increase in depreciable cost.
Tom Young
Can the property be transferred to a single-member LLC during the refinancing process and increase the cost basis that way? Would that require filing form 1065?
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