I purchased a rental property in increments. I bought 1/3 of it initially, then the second 1/3 and then the last 1/3. How do I establish the purchase price and date?

[wcraigw]

Now that I own all of the property, I started renting it in 2020.

[VolvoGirl]

What kind of property did you buy?   Is it a single house or a duplex, triplex, apartments, etc?  Maybe you need to add it as 3 separate Assets.

[Mike9241]

were you in a 3 person partnership and bought out the other partners? if not can you provide more info about the purchase? it's completely different if you bought100% on the installment basis where you paid off the purchase price over time and buying out other owners like family members.

as important how have you been reporting the rental activity.

[Carl]

You need to clarify that my assumptions are correct. If my assumptions are wrong, then I can assure you all of my responses (as well as the responses of others wose assuptions are wrong too) will be wrong and useless to you.

I purchased a rental property in increments. I bought 1/3 of it initially.

1. When you purchased the first third was the property a rental property at that time and was it being actively rented or advertised for rent?

2. Since you mention purchasing it in thirds, was their other owners who purchased their share at the same time? Or did you "buy in" to a property already owned by 2 others? (I'm assuming 2 others, and not more or less since you mention you purchased in thirds.)

3. Was a mortgage taken out for this purchase? If so, was your name the only name on the mortgage? If not, then provide details. This matters - especially for taxes.

then the second 1/3 and then the last 1/3

So was a separate mortgage taken out for the 2nd third? Or maybe you refinanced the first mortgage and "rolled in" the purchase of the 2nd third in the refi? Same question for the final third. Again, these details matter for taxes.

 How do I establish the purchase price and date?

Depends on the details. But in a nutshell, assuming the property was ***NOT*** classified as a rental or rented out until "AFTER" you acquired 100% ownership of the property, the cost basis is the *LESSER* of

1. What you paid for it in total

2. The FMV of the property when it was placed in service.

Again, it's the "LESSER" of those two items above. Most likely, the lower amount will be the total of what you actually paid for the property in full.

Also understand that depending on your responses, this may be simple, or it may be very complicated. While the TurboTax program can deal with the most complicated scenario I can think of at this time, it will require a "lot" of work on your part getting things set up correctly in the program. The tiniest of mistakes *will* grow exponentially over time, and if/when you catch that mistake years down the road, the cost of fixing it will be high.

Therefore, absolute perfection setting things up in the program in that first year is not an option.... it's a must.