Rental Depreciation when a partner dies

[gg9514]

We have a rental property owned by 3 people.  Two people own half (husband and wife) and the other person owes 1/2 (daughter).  The rental property was purchased in 2011 and was depreciation at the original purchase price through 2022.  The husband/father died May 10, 2017.  

We didn't reset the deprecation in 2017.  We would like to reset it for 2023.  Please confirm that we can do the following:

Retire the old depreciation value with zero purchase price for the house and land as of 1/1/203.

Add the new depreciation value at 2017 fair market value of the buildings.  The wife would take 1/2 then 1/4 of the $84,100 fair market value. which would be $21,025.  The daughter would take 1/2 of the fair market value of the buildings which would be $42,050.

Is this correct?

[tagteam]

Read the solution in the thread below. It may be of some utility.

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/my-wife-died-in-2022-...

[DianeW777]

The instructions are good in the link provided by tagteam.  One key factor is whether you are in a community property state, which if so, then you can have a stepped up basis for the entire property. Pay close attention for the property that has been carried on the depreciation schedule from the beginning.

Keep in mind that you cannot go back and recover the depreciation you lost because the amendment period is over for 2017 (2017-2019).  Tax year 2020 can still be amended until April 15th, 2023 and you have another year for 2021 and 2022.

It is possible to use Form 3115 to recover the depreciation for the period where you didn't change when required.  This can be used for 2023 or you can use it in 2024.  It can be completed in TurboTax Desktop and I would recommend a professional to help you with this form.

• About Form 3115, Application for Change in Accounting
• What should I do if I didn't take depreciation correctly on my rental property?

@gg9514 

[gg9514]

Michigan is not a community property state.  Michigan divides marital property using the theory of "equitable distribution".  So how does this then affect the depreciation for the remaining parties (i.e., wife and daughter)?