Need help in determining gain on sale of rental property bought in 1979 for $58,500 ($47,454 Building, 11,088 land) originally owned 50/50 but converted to 100% in 1994 and sold in 2023

[vegg]

August 1979 purchased condo for $58,500  ($47,454 Building $11,088 land) 50/50 with parents.

In July 1994 I purchased the remaining 50% interest and paid $45,000.   This $45,000 was 1/2 of original purchase $29,250 + 1/2 of calculated gain of $31,500 ($15,750) based on $100,000 FMV - $10,000 expenses -original purchase price of $58,500.  Depreciation was deducted from my returns from 1980-2009 for the entire $47,454.  My parent's share of depreciation $11,000 was factored into the Capital gains figure calculated for their 1994 return. 

The condo was sold in August 2023 for $595,000.

Selling Expenses were $54,699.83

My basis: $29,259 +$45,000 + expenses original purchase $599.84 = $74,849.84

Improvements  $19,621

Depreciation???    Total taken $47,454 on my returns.  What about $11,000 reported on parents returns in 1994 when I bought out my remaining 50% share?  Do I use  $36,454?

Land Value??  Is this factored into my gain from 2023 sale.  Land was 18.9% of original purchase.  Is the value of land at time of sale also 18.9% of the 595,000 gross sales price or $112,455?   Is this added to my adjusted cost basis when calculating the gain on my sale?  Could not find any IRS publication that talked about land. Pub 551 talks about allocating basis of property among the land and building so can figure depreciation allowable on the building.

You assistance is appreciated

[AmeliesUncle]

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@vegg wrote:

Depreciation???    Total taken $47,454 on my returns. 

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You haven't been depreciating the increased value portion of the 50% that you bought from your parents???

You haven't been depreciating the improvements?

[Edited]

[vegg]

No I only depreciated the entire original 47454.

[vegg]

I have not depreciated anything other than the full original $47,454 that was based on the original purchase in 1979.  At the time I bought out the 50% held by my parents the remaining basis to be depreciated was $25,422 and I continued on s/l basis with final depreciation on 2009 return.

[vegg]

With the exception of two improvements that were depreciated all other improvements were taken as expenses during the year they were purchased.

[AmeliesUncle]

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@vegg wrote:

At the time I bought out the 50% held by my parents the remaining basis to be depreciated was $25,422 and I continued on s/l basis with final depreciation on 2009 return.

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You BOUGHT their portion, so you should have started depreciating your new 'half' using your purchase price (minus land).

You should also have been depreciating the improvements that did not qualify to be deducted ($19,621?).   For anything that qualified to be deducted, that doesn't add to your Basis.  You said you depreciated them, but that doesn't match up with what you said your total depreciation was.

It sounds like you have been under-depreciating things since 1994 (and maybe earlier, if the improvements were before that).

You'll need to figure out what you SHOULD have been depreciating and use that for your "prior depreciation".

Due the mistakes, you want want to file an extension and go to a tax professional this year to review things.

[vegg]

I am not worried with how I handled the improvements or improvements that were depreciated separately. 

My posting was trying to clarify how to handle the 50% buyout from my parents.  You mentioned I should have started depreciating my new "half" using my purchase price (minus Land).   Would you mind an example of what numbers you think my new "half" purchase price is and what (minus Land) number should have been used for depreciation.  Of the new purchase price of $45,000, $29,250 was continually depreciated for the entire 30 year period.  Only the additional $15,750 (representing 50% of the gain has not).  

[AmeliesUncle]

When you bought the second half, you should have started to depreciated the $45,000 (minus land) using your purchase date of that second half as the "placed in service" date.

As I said in my last comment, you'll need to figure out what you SHOULD have been depreciating and use that for your "prior depreciation" (even though you did not actually claim it).  And due the mistakes, you may want to file an extension and go to a tax professional this year to review things.

[vegg]

I will contact a tax professional and go from there.  What seemed so simple obviously is not.  Thank you for your assistance.