What is rental purchase or acquire date and how to answer if rental was 100% business use?

[jammerjim114]

I purchased a house in 20003 for $235,000, made $150,000 in improvements while I lived in it, then rented it out in 2012, and sold it in 2016 for $459,000. It was appraised for $355,000 at time it was converted in 2012. I didn't claim any depreciation while a rental and never lived in the house from time it was converted to sold. Questions: For date rental was purchased or acquired, do I use date converted to a rental in 2012 or date I purchased property in 2003? Also, when asked if it was used 100% for business, do they mean since converted to a rental which would be yes, or since purchased in 2003 which would be no?

[kerriP · Accepted solution]

Basis for rental property converted from personal use, is the LESSER of the Fair Market Value on the date of conversion or your adjusted basis.  Adjusted Basis is (cost plus or minus any adjustments). This would be used to depreciate the rental.  Adjustments are mostly  improvements which increase your basis or cost in the house.

So on conversion to rental date -2012     your adjusted cost in the house    $385,000

                                                                               FMV at conversion          $355,000

Basis for depreciation  Lesser of two above:                                                $ 355,000

You would use the 2012 date of conversion and after that date 100% business

Note:  The IRS uses the term for Accumulated  Depreciation "Allowed  or Allowable".  They can and will propose changes to your return to "depreciate" a property  resulting in lower basis and more gain.  I would strongly recommend you calculate depreciation starting in 2012 , and carry forward the new accumulated depreciation amounts.  You can still amend 2014, 2015, 2016 to get the benefit of depreciation.

[jammerjim114]

I am selling the above rental property that was previously my residence. I'm having trouble with TT Premier in entering the actual cost basis rather than the fair market value. If I enter cost basis in sale of business property, I end up with each asset being listed twice! How do I fix this?