How should I file my income and expenses from renting a condo that I inherited from my husband?

[valentinakorea]

My husband died in 2016 and I filed that year taxes jointly. I inherited my husband's condo, which was rented at that time, and retitled it on my name on 04/03/2017. Condo was rented until 05/31/2017. I got tax form 1099-MISC for renting this condo in 2017 for 5 month in my name. How should I answer for some questions, for example:

Cost: The amount you paid for it, plus freight, installation, sales tax, legal fees. (The cost of the condo when my husband bought it, or the market value on the day of inheritance.)

Date purchased or acquired: (04/03/2017?)

Date I started using it in this business: (I would've answered 04/03/2017, but it was rented from 01/01/2017)

Percentage of time I used this item for this business in 2017 (e.g., 80%): (should I count it as 41% for whole 5 month of renting or from the day I acquired it?)

Generally, where should I remind that I inherited this condo and when.

[PaulaM · Accepted solution]

I am sorry for the loss of your husband in 2016. I'll attempt to answer your questions but I will need more details.

• Cost: This is going to be the FMV on the date of your husbands passing.
• Date acquired: The date it became titled in your name, 4/3/17
• Date you began to use it in business: Your business use began on 4/3/17.
• % of business use: Are you entering this in the Asset section and seeing this question there? If so, did you convert the property to personal use?

You will not need to indicate that you inherited the condo until you sell it and are reporting the sale.

[valentinakorea]

Thank you very much for your help!
I'm answering on these question in Asset/Depreciation section.
I haven't live in the condo permanently the rest of 2017 and I'm going to lease it again in next month. In this case, do I have to check the box "I converted this property from a rental to personal use in 2017"?
One more thing. Should I check the box "I purchased this asset new?" I believe not, because it was rented many years before I inherited it, but I want to be sure.

[PaulaM]

You are welcome 🙂
In the Asset section-No to the new question.
Did you live in the condo at all in 2017? If not, did you attempt to rent the property after 5/31/17?

I'll check back in here tomorrow..

[valentinakorea]

Thanks a lot!
Yes, I lived in the condo for a while in 2017. I didn't attempt to rent it, because I was doing some updates such as painting, changing some kitchen appliances, etc. Does it mean I converted this property from a rental to personal use in 2017?
I'm just confused about days and percentages of renting, because I inherited the condo in 4/3/2017, but I received incomes and payed expenses for whole 5 month, since 1/1/2017 to 31/5/2017, because I was the only hear and also a personal representative of the estate. I got 1099-MISC from the real estate agency for whole 2017 in my name, so I would like to file all renting taxes, just not sure how to do this right.

[PaulaM]

Here’s how I would handle your situation:
For 2017: Once a property is no longer available to rent, it becomes personal property. You can’t deduct depreciation or expenses for personal property (property taxes can be deducted on schedule A). Improvements however, can be added to the basis (cost/FMV).

Under the Property Profile section, indicate that you converted the property for rental to personal use. Under the Asset section, add the condo with the 4/3/17 date and indicate that you retired the asset on 6/1/17. 100% business use for the dates listed.

This is adding and depreciating the rental for the 2 months usage, then removing the asset for the rest of the year. Print the depreciation report and keep for your records. You will need this when the condo is sold. Enter your 1099 Misc income under the rental summary Income section then enter your rental expenses.

For 2018: On next year’s tax return, add the asset back and begin depreciation again. Its cost will be the FMV + any improvements you have made. Always print the depreciation report.

[valentinakorea]

Thank you! I think that I finally got it.
So under the Rental income section I file income from my 1099 Misc for 5 month (151 day) of renting and under the Expenses section - the expenses for 5 month.
Under Assets/Depreciation section: Percentage of time I used this item for this business in 2017 (e.g., 80%): 16% for 59 days from 4/3/217 to 5/31/2017.
Should I keep the depreciation reports for previous years when my husband owned the condo?

[PaulaM]

You do not need to worry about past depreciation on inherited property. You begin depreciating on the stepped up basis (FMV) when you inherited it.

[valentinakorea]

Thanks to you, I've almost done with my taxes.
Last question, they ask me about AGI from my 2016 tax return. This was the year of my husband's death, so the taxes were filed as Marride filling jointly for the last time and my husband's name was on the first line marked Deceased. My name was on the second line as a spouse. This year I file a tax return from my own name for the very first time. In this case, what box should I check: I have my 2016 tax return (and than add the number from 1040 line 37), or should I check the box: I didn't file last year?

[PaulaM]

You should use the 2016 AGI number. Let me know if it doesn't work.

[valentinakorea]

Everything worked and I've just filed my 2017 taxes. Hooray!!!
Thank you very much, I wouldn't have done this without your help.

[PaulaM]

Yay! Good to hear. You are welcome 🙂