If the appraisal of property list the value ,use the value of the cottage to arrive at the asset cost of the cottage to set up for depreciation..(less land value that it set on ) land is not depreciated.
If no separate appraisal separate total of land value from your total cost. Then calculate total square footage of each that will give you the cost per square footage and then allocate the average to your cottage and find the land area the same way.
Ask a real estate agent to help you find the fair market value of the property. Real estate agents provide CMAs to both buyers and sellers. If you are a seller, you can employ a real estate agent to run a CMA as a part of her service to you. A CMA is normally performed by an agent from her office, using various real estate tools.
Cancellation of debt (COD) income.
Specifically, the taxpayer must reduce certain beneficial tax attributes, including basis in property, that would otherwise decrease the taxpayer’s income or tax liability in future years.[IRC §108(b).]
https://www.law.cornell.edu/uscode/text/26/108
Generally When an individual sells property, the excess of the sales price over the original cost plus improvements (adjusted basis) is normally gain subject to tax.
In some instances,such as yours, lenders may restructure or rearrange debt, cancel some debt, and allow the homeowner to retain ownership of the home. Current law stipulates that the excluded COD income be accounted for through reducing the basis in the residence.
You retained the house and sells at a later year, while accounting for the excluded COD income through basis adjustment,defers taxes owed on the disposition until the year of sale.
The best advise you can heed is to gather all your records and run to a qualified CPA to work this out to your best advantage.
