Can I deduct a house my wife and her sister inherited? Paid the sister cash for her interest. Began fixing house which was in horrible condition to make into rental.

[AnnetteB · Accepted solution]

Until you either sell the inherited house or put it into service as a rental property, you will not report it on your tax return.  The only exception to this would be any property tax that you paid during the year.

Keep records of the improvements that you make to the property prior to offering it for rent.  These improvements will be added to the basis of the house when it become a rental property. 

Also, keep records of the fair market value of the property when it was inherited as well as the amount you paid for the sister's interest in the property.