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Level 3

Depreciation of rental property rented after a gap of few years

I purchased and rented a condo overseas in 2014. After Dec 2014, I kept the condo vacant because I thought my father may use it. I suspended depreciation and removed the condo from my tax returns from year 2015. The condo was neither used nor rented after year 2014. In 2019, I rented the condo again. As I had remved the condo from TurboTax, it did not keep the records from year 2014. So I manually enetered the tax basis and prior depreciation (for year 2014). TurboTax is giving a higher depreciation for year 2019 than it should. I cannot figure out the reason. I will appreciate any guidance.

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Level 10

Depreciation of rental property rented after a gap of few years

Forget the gap.  It was taken out of service.  So your new "placed in service" date is 2019 and start the depreciation anew (30 years).

 

For the amount, you use the usual rules:  The lower of (a) Adjusted Basis or (b) the Fair Market Value when placed in service (2019).  Your Adjusted Basis is usually (1) original purchase price, plus (2) cost of any improvements, minus (3) depreciation from prior time periods.

 

When you eventually sell the property, you will need to report the sale differently than usual because of that 'gap' and the prior depreciation.

 

I think you misentered the rental furnishings because that should not be 7 years. Normally they are depreciated over 5 years, but because your rental is not in the United States, that would be over 9 years.  Be sure you classify it as rental furniture.

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Level 15

Depreciation of rental property rented after a gap of few years

i don't think TT can handle this type of situation. because you deleted the asset and thus TT couldn't tract that 0 depreciation that was proper for the non-rental period.  In TT there is an asset life history but no way to edit it.  for now, all I can suggest is that you keep track of the 2014 depreciation outside of TT and you enter the rental as being placed in service in 2019. maybe someone will have better idea

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Level 4

Depreciation of rental property rented after a gap of few years

TT doesn't handle this well so you have to "make it fit" ... the workaround in your situation (rented in 2014 only then again starting in 2019)  is to enter the asset as if  it was being placed into service in 2018 ( instead of 2014) ... this way the "prior year " depreciation will be calculated and carried forward ... it will not mess up the IRS.  

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Level 15

Depreciation of rental property rented after a gap of few years

The TurboTax program flat out can not handle your situation "correctly" without you doing some manual finagling.

I can help you with details here, now that things have slowed down a bit since the 2019 tax filing season is over. But I need details.

- On what "exact" date was the property originally placed in service? (The depreciation start date)

- On what "exact" date did you convert the property back to personal use ans stop depreciation?

- What is the cost basis of the structure that was depreciated? To get that, you need to look at your 2014 tax return. In that package is IRS Form 4562. There are two 4562's for that specific property and they both print in landscape format. The one I want the numbers off of is titled "Depreciation & Amortization Report".  I need the figures from the following columns:

Cost (net of land)

Prior year Depr

Current year Depr

 

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Level 3

Depreciation of rental property rented after a gap of few years

Hello Carl,

 

Many thanks for the tips and offer of help. 

 

Property placed in service (available for renting): 4-11-2014

Stopped depreciation of property on 12-31-2014, property sat vacant, not used personally, not tenanted

Cost basis: $270,804, Land: $18,994, Structure: $251,810

Depreciation during 2014: $4,459 (40 years , MM, S/L), Prior year depreciation: 0

In addition, furnishings cost basis $1,566, Depreciation during 2014: $109 (7 years, MQ, S/L)

 

Another issue I run into is that the depreciation period changes to 30 years if I start finagling, e.g., showing placed in service date to 4-11-2018 to avoid the gap years of 2015-2018, etc.

 

 

 

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Level 15

Depreciation of rental property rented after a gap of few years

Couple of things to note:

On "Tell us more about this rental asset", Select that "No, I have not always used this item 100% for business.."

Then below that select the one for "I have used this item at least part of the time for business business, and also used it for personal purposes."

Date you started using it in this business will be 6/11/2018 (TWENTY EIGHTEEN). Percentage of time used in 2019 will be ONE HUNDRED PERCENT.

Now enter the correct prior depreciation amount of $4,459 and press on with life. The 2019 depreciation amount should be $8,397.

 

Keep miticulous notes on what you did and why you did it. This *WILL* come up again in the future and will most likely require a CPA. If you don't have notes, the CPA will be charging you out the arse to figure it out.

 

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Level 4

Depreciation of rental property rented after a gap of few years

Yes ... forgot about the change in years for overseas rentals ... wish you would have mentioned it in your original post ... gave instructions for US rentals.  

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Level 3

Depreciation of rental property rented after a gap of few years

Truly appreciate your time and your selflless service. It will be wonderful if you have a suggestion for how to handle this because the condo is overseas. 

Highlighted
Level 10

Depreciation of rental property rented after a gap of few years

Forget the gap.  It was taken out of service.  So your new "placed in service" date is 2019 and start the depreciation anew (30 years).

 

For the amount, you use the usual rules:  The lower of (a) Adjusted Basis or (b) the Fair Market Value when placed in service (2019).  Your Adjusted Basis is usually (1) original purchase price, plus (2) cost of any improvements, minus (3) depreciation from prior time periods.

 

When you eventually sell the property, you will need to report the sale differently than usual because of that 'gap' and the prior depreciation.

 

I think you misentered the rental furnishings because that should not be 7 years. Normally they are depreciated over 5 years, but because your rental is not in the United States, that would be over 9 years.  Be sure you classify it as rental furniture.

View solution in original post

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Level 3

Depreciation of rental property rented after a gap of few years

Thanks! On furnishings, the depreciation was over 9 years in TT, I made a mistake in noting it as 7 years in my post.

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Level 3

Depreciation of rental property rented after a gap of few years

I had a tax loss carryover on this property. Can that be used?

Level 10

Depreciation of rental property rented after a gap of few years

If you had a Passive Loss Carryforward, that continues on regardless if the property was rented or not.  So if you did not have any other Passive Income for that carryover to offset, yes, that Passive Loss Carryforward still exists.

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