Teeing up residential rental cost base - Non-collaborative former CPA

[VolvicNaturelle]

My spouse and I own a small apartment overseas where we used to live (~2 years), and which we are currently renting out. In order for the 2023 1040 Schedule E, I'm trying to figure our depreciation & cost basis.

Last year, a CPA filed our returns for us.  He elected an ADS schedule with MM convention and fixed a purchase price/cost base. I can see the cost base in my return, but can simply not replicate it based on the data & paperwork we provided - we are off by about 1% in cost base.

1. Is a 1% difference in cost base small enough to simply accept utilize going forward?

2. Are there any adjustments  that are easy to overlook which could explain the gap? I've tried to reverse-engineer by taking out parts of the capital improvements, changing across currency conversion rates, partial "silent" depreciation before in service as rental property

3. Suspecting the culprit might be the "lesser of rule", is there a standard resource which is used? My margin of error doing this via comparables is ~5-10%

4. Would a one-off amendment make sense to ensure I have a cost basis I can back-up within <1% in the future?

For context:

Unfortunately, we've had extremely bad experiences with a costly CPA who also refuses to share with us the paperwork/schedule of how he fixed the purchase price. I will omit the details here, but I have no hope of ever recouping this data from him. 

[tagteam]

You most likely have a right to the documents that directly impact your tax return and the cost basis.

If your CPA refuses to provide such information, you should contact your CPA and threaten to report that individual to your state's board of accountancy.

https://nasba.org/stateboards

[VolvicNaturelle]

Understood, thanks.

Fwiw, I'm also confident I should be able to get these documents but whether I will might be a different story. That individual had a year of wild feedback/reviews and petty court appearances - which I don't need to be part of. Report to the board is out already in any case. 

[RobertB4444]

In this case a 1% discrepancy in cost basis is forgivable as you are doing your level best to recreate records that are lost to you.  The date placed in service seems the most likely cause of such a discrepancy but it's difficult to say for sure without examining everything.  

I would just carry forward with the new basis and depreciate from here.  It is unlikely that it would ever be questioned but if it was a copy of the original depreciation table from last year's return along with a copy of this thread should be explanation enough.

@VolvicNaturelle 

[VolvicNaturelle]

Thank you @RobertB4444 !

Are you confident in this recommendation // does this qualify as TurboTax Expert advice? 

I'm not sure whether a copy of a forum thread carries a lot of weight when push comes to shove.

Reason I'm asking is I was (strongly) recommended on other channels to file an amended 1040-NX etc.; which might cause more confusion than good I fear.

Thank you
Jan

[VolvicNaturelle]

Hey @RobertB4444,

just to follow-up: So if you were in my shoes, you would recommend I change the basis now in turbotax and depreciate from there. Obviously, will keep track of the actually taken depreciation for completeness sake - although I understand for the depreciation recapture, depreciation could-have-taken matters anyhow. 

Thank you

Jan

[DianeW777]

Yes, you can count on the advice from @Robert84444.  You have the documentation to enter the cost basis you believe to be correct.  

At a point of sale, all depreciation allowed or allowable (used or not) will be part of the calculation for determining gain or loss. Keep your original return and all returns going forward until you no longer have this property.

Keep in mind that when a property is converted from personal use to rental use, the cost basis for the property is the lesser of:

1. Actual cost plus purchase expenses, any capital improvements, OR
2. Fair market value (FMV) on the date of conversion.

If the real estate market where this property is located has increased in value, then your cost will be the depreciable basis.

@VolvicNaturelle