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 |
@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 ?