Can I change ownership percentage

[Chung11358]

Can IRS allow to change the ownership %,  I have the rental property divide 4 . The parent get 50%, first son get 25%, 2nd son get 25% for 30 years of taxes filling. Now a father died can we change the ownership give to the first son take care the property to 50%.  The parent get 25%, first son get 50% and 2nd son get 25% of ownership rental house. Thanks

[PatriciaV]

Please clarify what version of TurboTax you are using. Are you filing a business or personal return?

[Chung11358]

I am using Turbotax Home & Business

[PatriciaV]

It depends on how you entered the Rental Property in TurboTax. You may be able to simply change the ownership percentage in two areas of the rental activity. Note that each owner will make these changes on their own tax return.

Open your return and search for "Schedule E" and click "jump to schedule e." Edit the rental property you need to work on.

Property Profile

1. On the page "Property Ownership," check the box for "No, I owned less than 100%." (This may appear on a page for "uncommon situations" in TurboTax Online.)
2. The next page will ask if you want to enter total amounts for your expenses, or if you want TurboTax to do the math. Enter your current ownership percentage if you want the program to do the math.
3. Continue to answer the questions until you are back on the Rental Summary Page.

Assets/Depreciation

1. A. If you entered a percentage of business use for each asset that was the same as your ownership percentage, you can enter the new percentage on the asset information page. 
2. B. But if you reported 100% business use and entered a basis equal to the percent of the property that you owned, you will need to retire all existing assets and add new assets using the revised cost basis.

Handling the change in asset ownership is complicated and requires attention to the details. In summary:

1. Review the existing asset and write down the cost, date placed in service, accumulated depreciation, and current depreciation.
2. Go back and report that you disposed of the asset by converting it to personal use (not a sale) as of the date before your ownership changed.
3. Add a new asset using a basis equal to the original cost less all depreciation and placed in service on the date the ownership changed.

Here are two posts to help you with this process:

• Expert DianeW777: How does change in ownership percentage affect depreciation?
• Champ Carl: How can I change the ownership percentage of a rental property asset?

If you believe you need additional assistance, consider using TurboTax Live, where a tax professional works with you to complete your entries, either over the phone or by sharing your screen.

[Chung11358]

I just wonder the IRS allow me to change the rental percentage of the parent and the sons because for the last 30 years the parents got 50% and the first son got 25% and second son got 25% on the rental property.

and now I want to change to the parents 25% and the first son take care of the property got 50% and the second son get 25%. and I know, Ican change on the turbotax but I don't know the IRS allow me to do that.

Thanks for your help.

[KrisD15]

No, there is nothing you need to file with the IRS. 

Since the transfer is being done between family members, all of which were partial owners all along, just keep records with your tax files. Make sure everyone has the same information in each tax file. 

When you do sell, you will need to know the depreciation taken and you will prorate the Depreciation Recapture and Capital Gains to each owner (if applicable). 

[Carl]

FIrst, with the TurboTax program, if you just arbitrarily change the ownership percentage, that will completely skew the depreciation, to include the depreciation history, current year depreciation, and future depreciation. So just changing the percentage is not the way to go, as it flat out will not work correctly with any version of the TurboTax program.

How you do it "correctly" depends on how the recipient received the deceased father's ownership share. For example, did they inherit it? Or did the mother inherit it and the mother gifted it to the son?  It would be normal if the parents were married at the time of the father's passing for the mother to inherit it, unless specified otherwise in a last will and testament. It would also matter if the parent's live in a community property state, as that determines how the step-up in basis is figured.