Rental property depreciation

[prbailie]

I am doing an amended 2018 tax return because there wasn't any depreciation expense calculated in my 2018 Turbo tax return.  I am using my 2018 property tax assessment statement values for this calculation:

Land = $161,640; Bldg = $135,529; Total Values=$297,169.

The initial purchase price on my property was $220,000.  Turbo tax asks to enter the purchase price ($220,000) and the land value.  Should I use 73% of $220,000 ($161,640/$220,000)=$160,600) as the land value in my amended return?  In addition, should I use the value of $297,169 (from property tax statement) as the cost instead of $220,000?

[MinhT1]

You should apportion the purchase price if your property ($220,000) between Land and Building using the proportions in your property tax assessment statement. That statement gives 54.4% for land ($161,640/$297,169) and 45.6% for Building.

In TurboTax, you should apportion $119,680 for Land (54.4% of $220,000) and $100,320 for Building.

Edited 4/8/2020  |  4:47 PM PST

[prbailie]

Thank you for your reply.  So when I'm asked in Turbo Tax for the cost (the amount paid for property) do I use $220,000 (the initial amount I paid for it) or the amount $279,169.00 from the property tax statement?

[AmyC]

Use your purchase price. IRS says you must use the Lower of fair market value or your basis.

Related:

Real Estate Tax and Rental Property

IRS Pub 527 for Rental Property

[prbailie]

Thank you again for your response.  I believe 54.4% of $220,000 should be $119,680 for Land.  I will use $220,000 for cost and $119,680 for Land in Turbo Tax.

[MinhT1]

Sorry for the typo. I have edited my answer.

[Carl]

Check your numbers. While it's not unheard it, it is not common for the value of the land to be higher than the value of the structure on that land. It is possible however. For example, if this is in California then it's absolutely possible. Or if your land is 10 acres or more with a single family structure on it that's not a celebrity mansion.

[prbailie]

Thank you.  Yes the property is in California.