Inherited Property, then bought out family

[jlewis2881]

In June  2019 my brothers and I inherited a house when my mother passed away.  Four brothers all together.  It was vacant until 8/1/2020 when it became a rental property.  On 9/17/2021, I bought out my three brothers.  The inherited price of the house was 630K (June 2019), when I bought them out on 9/17/2021 the appraisal was 780K.  Just trying to figure out how to report all this and if I can change the value of the house when I had to refinance it to buy out my brothers.  

[Mike9241]

when was the property distributed from the estate? you see, it matters who had title when you bought the property. 

for now, I'll assume title had transferred to the 4 of you before it was rented. probably a partnership return should have been filed but I'll pass on that for now.

each of you would have a basis of $630K/4 or $157.50K (after deducting the value of the land) on which depreciation should have been taken. 

then you paid your brothers 3/4 of $780/K or $585K on 9/17/2021

so you carry on depreciation your original 1/4 based on the $157.50 less the land value.

you would list the $585 + any closing costs and legal fees to acquire it as an addition on 9/17/2021 you would need to break out the value of the land. this would be depreciated over 27.5 years 

if my assumptions are wrong you should consult with a tax pro because things can get very messy and complicated in other situations not only for you but for your brothers as well.

[Hal_Al]

Confirming what Mike9241 said: you don't change the value of the house your are currently depreciating.  You enter the purchase as a separate asset and begin depreciating it (separating out the land value).

[jlewis2881]

When I purchased the property from my brothers, all four of us including myself had title.  Each having an even 25%.  Your other assumptions are correct.   In 2020 was depreciating the $630K/4.  My confusion is what do I with original depreciating asset of $630K, and now I have the house I purchased for the additional $585K.  

Do I just add this purchase as a new asset at the $585K + closing costs.  

Thanks, just trying to wrap my head around this one.  I appreciate the feedback.  

[jlewis2881]

Hal_Al

Thank you for the help with this one.  Sounds like I don't touch first depreciating asset of the house when inherited at $630K/4. 

I just need to add a new asset of purchasing the house and paying my brothers the $585K and loan costs to own the entire property.   

[Hal_Al]

Correct.

The new asset is set up for depreciation  at a value of  $585K + loan & closing costs less the value of what was their share the land.