Cost basis fluctuation of foreign rental property due to exchange rate each year, do we use CDN value or US value for deprecation

[paulreese18]

I have a Canadian property which had a Building value of 200k USD bought in 2011 which was 202k CDN in 2011 because of CAD dollar being stronger in 2011. I am trying to file form 3115 to catch up on missed deprecations.  Since than Canadian dollar has been falling every year.   Please note the value in the CDN dollars remains the same but USD keeps changing because of exchange rate as can be seen in this table. 

Could  I convert the cost basis in USD based upon yearly average exchange rate each year and then deprecate it or do I need to stick to 2011 exchange rate and use converted cost basis every year

Return Year	CDN to USD Average exchange rate	Land Value CDN	Building Value CDN	Land Value USD (Different each year due to change in exchange rate  )	Building Value USD (Different each year due to change in exchange rate  )
2011	1.01	$  100,000.00	$     200,000.00	$          101,000.00	$       202,000.00
2012	1.012	$  100,000.00	$     200,000.00	$          101,200.00	$       202,400.00
2013	0.9710	$  100,000.00	$     200,000.00	$             97,095.41	$       194,190.82

[pk]

@paulreese18 , as I get from your detailed post --- you bought / converted a residential property into  residential income property  ( in Canada ) in 2011.    Your basis in the property  was and continues to be  Acquisition  cost in US$ of 2011.  Your depreciation basis   at the time was  Acquisition Cost LESS  Land Cost.  This is again  in US$ of 2011.   From then  your basis and acquisition basis   and Depreciation basis remains the same in US$.  You cannot  adjust  these figures ONLY in case  you make improvements ( increases the  basis  and the depreciation basis -- additional depreciation).     Your Schedule-E  recognitions for the year  i.e  gross rent, expenses, taxes etc etc.  are based on either US$ of the day or average US$ for the year/quarter/month etc -- but  you must use the same modality all the time.

Does this make sense ?

[paulreese18]

Yes it does thanks for your response.