Setting up depreciation for inherited rental property

[Aussie]

I inherited a townhome rental property. I have an appraisal which will be used to establish cost basis. This cost basis will be used to set up depreciation for the townhome rental property. My understanding is the value of the land should be excluded for the depreciation amount. The appraisal does not segregate the land from building. What is best way to calculate the value of the land vs building?

[tagteam · Accepted solution]

You can look at the real estate tax assessment as some will provide an allocation for the structure and the land value and use that percentage (not the actual values, however).

For example, if the assessment allocated $100,000 to the land and $200,000 to the structure, then you could use that percentage (e.g., if the appraisal came in at $600,000 combined you could use $200,000 for the land and $400,000 for the structure).

It would, of course, be optimum if you could get the appraiser to provide a break down for the land and structure value.

[DianeW777]

The best way to calculate the land value is to use the tax assessment numbers from your city or county office.  The building and land is listed separately on the assessments. Take the land value and divide it by the total value to arrive at the percentage to use for land on the actual total value from your appraisal. Be sure the appraisal is the amount of inherited value on the date of death of the previous owner.  Fair market value (FMV) on the date of death is what a willing buyer would pay and a willing seller would sell the property for.  

[Aussie]

Any other suggestions for figuring out the land vs building? Unfortunately, my tax assessor doesn't break anything out between land and building

[tagteam]

You may not actually own any land (at least directly) if there is an HOA (or similar association). 

Otherwise, you can try contacting the appraiser to see if they can provide an estimate.