If a property is put in a trust can it be depreciated again because it changed ownership?

[newbie35]

It is an irrevocable trust and it ran out of depreciation while my dad owned it.

[tagteam · Accepted solution]

"If a property is put in a trust can it be depreciated again because it changed ownership?"

No, not really. In this instance, the trust would take the basis (considering depreciation) of the previous owner(s).

A new basis (with depreciation starting over) would only be the case if the owner died and the property was transferred into a testamentary trust (or a revocable living trust became irrevocable upon death) or the trust acquired the property for value in an arm's length transaction (i.e., full consideration - FMV - was paid).

[DRPCPA]

I have a revocable trust that owns rental properties. The grantor is now deceased. I am filing a 2021 1041 reporting the rental income and depreciation using the step up in basis. The assets are distributed by the end of 2021. Do I record them as being disposed of? If yes, how? I am assuming that the beneficiaries also get a step up. How does that work with the 2021 depreciation? 

Thank you!

[Critter-3]

I highly recommend you seek local professional assistance with this return if you are unsure of what to do.  The TT downloaded business program doesn't have a lot of personal assistance available from tech support. 

[pk]

@DRPCPA , while I consider the advice by @Critter-3 , absolutely correct, I would just like to point out a few things  that may help your discussion with the professional or if you choose to do it by yourself anyways ( and comfortable  enough to go forth )

1. The trust at the instant of demise of the "trustor"  changed to an irrevocable  trust.  At that point all you as an executor is follow the instructions.

2. Assuming that the  trust and the estate are intertwined ( as is usual ), especially with a pour-over clause  -- the disposition / liquidation of the trust is all per the instruction/ testament or probate judge directions

3.The properties in the trust all get the  step-up / down ( to FMV) as per the state laws

4. If you are to transfer the ownership of rental assets, per instructions, then FMV applies to the basis but what happens to the accumulated depreciation ?  It disappears  with the demise of the original owner-- so it is a fresh start whether in the hands of the trust or the beneficiary -- state laws rule here.

5. Till the distribution of the rental assets , the incomes and expenses , while carried on the books of the trust, is best transferred  to the beneficiary if the assets are also transferred to the beneficiaries.  However these assets are disposed of , then directly or indirectly needs to close the books and file showing all the incomes , expenses and pay the taxes  or by using K-1 transfer these to the  incomes and liabilities to the beneficiaries.

That is my take on this  --  and IMHO.

But I do agree  that consultation ( while  tight timing for 2021 tax year ) is very much advisable.

pk

@Critter-3