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How do I enter real estate prior depreciation in form 1065

If this question has been asked before, please point me to that Q&A for the correct answer.   Details:

- Purchased a rental SFR, placed it in service on 05/2021.

- Total property basis = $127,505

- Original depreciable basis, net of land = $86,133

- Depreciation is straight line over 27.5 years

- Accumulated depreciation until 12/31/2022 = $5,090

- Property was reported on our own 1040 schedule E (MFJ situation)

- On 1/1/2023 title to the property transferred to a newly established partnership [LLC], we are the only 2 members.

 

Using Turbotax Business to enter all partnership info including this property and create a 1065. 

Specific questions:

1) Do I tell TT this property was placed in service on 05/2021 or on 01/2023? Turbotax is upset about a property placed in service before the partnership was established...

2) What do I tell TT is the depreciable basis ?

3) Where and how do I tell TT about the previous accumulated depreciation?

4) How do I convince TT to continue calculating the annual depreciation [= $3,132] and the accumulated depreciation correctly ?

5) What if anything am I missing in this context ?

1 Best answer

Accepted Solutions

How do I enter real estate prior depreciation in form 1065

Responses to your questions:

  1. When property is contributed to a partnership (LLC taxed as a partnership), it is a step into the shoes type transaction.  The date placed in service is the date placed in service when owned individually.  Yes, this may cause TT some confusion.
  2. As noted in response 1, everything just carries over for tax purposes for the LLC.  No change in basis.
  3. You provide this information when entering the asset into TT.
  4. If you provide the correct information, most likely using the forms mode as noted by @tagteam , this should provide the correct figure.
  5. Don't believe you are missing anything.  TT software is aimed at the masses and sometimes has difficulty in more complicated scenarios.  Just keep in mind, this is a step into the shoes transaction.  Nothing changes for the asset; basis the same, life the same, depreciation method the same, placed in service the same.
  6. If you have difficulty, call TT for assistance.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.

View solution in original post

3 Replies

How do I enter real estate prior depreciation in form 1065

You are probably going to be better off entering this asset in Forms Mode on the Asset Entry Worksheet and Form 8825 Worksheet.

 

The property's basis (and attributes) should carry over to the partnership.

 

I will also page Champ @Rick19744 for input.

How do I enter real estate prior depreciation in form 1065

@tagteam Understand the conceptual guidance, but - is it possible to get specific answers to my questions 1) to 5) ? This will help me the most.

How do I enter real estate prior depreciation in form 1065

Responses to your questions:

  1. When property is contributed to a partnership (LLC taxed as a partnership), it is a step into the shoes type transaction.  The date placed in service is the date placed in service when owned individually.  Yes, this may cause TT some confusion.
  2. As noted in response 1, everything just carries over for tax purposes for the LLC.  No change in basis.
  3. You provide this information when entering the asset into TT.
  4. If you provide the correct information, most likely using the forms mode as noted by @tagteam , this should provide the correct figure.
  5. Don't believe you are missing anything.  TT software is aimed at the masses and sometimes has difficulty in more complicated scenarios.  Just keep in mind, this is a step into the shoes transaction.  Nothing changes for the asset; basis the same, life the same, depreciation method the same, placed in service the same.
  6. If you have difficulty, call TT for assistance.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
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