No purchase record for appliances put into service in residential rental

[Banjer]

Taxpayer put a residential property into service during 2024. The rental included some old appliances such as refrigerator, washer/drier, and some furniture. There are no purchase records for these items.

What can be done about getting a depreciation deduction for this property, given the lack of purchase records? Can one make a conservative estimate of the Fair Market Value of the used appliances and use that as the basis? Does the IRS have guidance on this?

[KrisD15]

No, it doesn't work that way unless you are having a cost segregation done.

Normally, when property is purchased and placed into service as a rental, the basis is split between building and land only.

The building depreciates, the land does not.

If later you add to the rental, such as an appliance, that appliance is entered as a new asset for the rental and starts to be depreciated on its own based on it's basis (cost value).

When the rental is sold, if there is remaining value to the additional asset, the sale's proceeds will be split between land, building and the additional assets remaining on the books.

It is possible for a "Cost Segregation" to be done where assets, such as appliances, are valued and listed separately. This is usually done if there is machinery involved, but it can be done for residential rentals as well. There isn't much value in doing it for the average rental, but if that is the direction you want to go, I suggest you hire a professional to make the adjustments. 

[Banjer]

I do not know what "adjustments" you are referring to in the last sentence. Cost segregation cannot help with my problem. The place was purchased decades ago. It was placed into service as a rental last year. I have the cost basis of the land and the property improvements already broken out, and neither includes any appliances.

My question pertains to appliances put into service last year. If I had the purchase price for the appliances, I would enter the price and date purchased into TurboTax and the program would figure out a depreciation for it for the period that it was in service as a rental last year.

So what do I do if I do not have a record of the purchase? Am I just out of luck for depreciation deductions?

[KrisD15]

The IRS could ask for receipts. 

[Banjer]

My question is very simple. When the property was put in service as a rental, it included some appliances that had been there for a few years. As I have stated, I have NO RECEIPTS for these appliances, no purchase records.

My question is: Is there some way of getting a depreciation deduction for property whose existence I can easily document, but for which I have no record of a purchase? Does the IRS have any guidance for such a situation?

Are we clear now on my question? The answer starts with "Yes" or "No" and then goes on to give an explanation, perhaps citing law, regulation, IRS guidance, or common practice.

[MaryK4 · Accepted solution]

No, your question is not clear. If you want to depreciate the items, you can enter the fair market value when they were placed in service.  See Other Basis.  @Banjer