Rental property buyout after a divorce

[Seekfaith]

My spouse and I divorced in April 2021. I bought his half of our home (it is a duplex). I live in one side, rent the other. Can I update the purchase price to reflect what I paid him? If so, how? Can I then reset the depreciation to 27.5 years? Again, if so, how?

This will entail filing an amended return for 2021 and 2022.

[Carl]

YOu don't "update" anything. You have an outright purchase/acquisition to report. I assume you closed on the purchase in 2023?
You need to provide more details too, as I'm not clear why you would need to amend a prior year return because of a purchase/acquisition you made in 2023.
Also need details of how things were "before" the separation/divorce/buyout. Was only one unit rented out? If so, when was the property originally acquired or first placed into service? Maybe both units were rented out and you lived elsewhere? Maybe neither unit was a rental until some point during or after the separation/divorce?
Lots of variables here. So need details, mainly on the historic use of the property, along with how it was reported in the past.
What was the last tax year a joint return was filed, on which this property or any portion of it was reported on SCH E?

[Rick19744]

There are too many questions to be able to provide some guidance:

• The state of residency may have an impact
• We don't have privy to the divorce agreement
• While you may indicate that "you purchased 1/2 of the property", however a key here is whether this transaction was incident to a divorce.
• I'm going to recommend you meet with a tax professional and take along your divorce agreement

[Seekfaith]

Good morning, 

My apologies for my delay, I attempted to respond to the email.

We separated in 2020, our divorce was finalized in April 2021. I bought him out with cash in April 2021.

Prior and post-divorce, one unit was rented, the other owner occupied. The property was originally acquired May 1996.

The last joint return filed was TY2020, SCH E was filed with the return.

The property is located in Maine. I purchased his share (his 1/2 ownership) of the property; I am now the sole owner.

Thank you.

[AmyC]

About Publication 504, Divorced or Separated Individuals - IRS has a chart and may offer some help. As @Rick19744  stated above, we don't have  the full information.

Beyond that, I would need to see tax returns, divorce papers, etc.  With no knowledge, I will say there should be a clear delineation of the property going from joint ownership  to just you. Your basis may increase by the expenditure but you keep the depreciation already claimed.  See IRS Pub 544