Why do you think that the asset, the house, did not receive the "stepped-up value" on the date of death if the house was owned by the decedent and passed ownership into the trust on date of death?
Unless the ownership passed in some other way, such as the owner deeded the house to the trust, that is a residential trust, while alive, the step-up would take effect.
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Cost Basis: The value of the house for both Trust purposes (that is Federal Tax Filing) and business depreciation is not the assessed value but the Fair Market Value. Thus, the correct Cost Basis should have been that used when the Executor filed a Form 1041 for the Estate or the Trustee filed a Form 1041 for the Trust. The Cost Basis of a house or other property that passes on death of owner into a trust or estate is that value Fair Market Value on the date of death - what an independent buyer would have been willing to pay to purchase the property, and not the assessment.
You may have to make increases or decreases to your basis for certain events that happen between the time the trust acquired the property and the time you have it ready for rental. Examples of increases to basis include the cost of any additions or improvements that have a useful life of at least one year made before you place the property in service, money you spent to restore damaged property, the cost of bringing utility services to the property and certain legal fees.
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Depreciation period: Once you decided to turn the property into a rental unit it became business property so the depreciation starts on that date and not on the date the property passed in to the trust. Note that depreciation only applies to the building and not the lyou can only depreciate the cost of the building and not the land, you must determine the value of each to depreciate the correct amount. To determine the value, you can use the fair market value of each at the time you bought the property
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Depreciation Method: TurboTax will suggest the correct depreciation basis which is appropriate for any residential rental property placed in service after 1986; it is depreciated using the Modified Accelerated Cost Recovery System (MACRS), an accounting technique that spreads costs (and depreciation deductions) over 27.5 years, the amount of time the IRS considers to be the “useful life” of a rental property. You can only depreciate the cost of the building and not the land, you must determine the value of each to depreciate the correct amount. To determine the value, you can use the fair market value of each separately at the time the trust acquired the property. Of two MACRS methods available, the one that applies to your situation is the General Depreciation System (GDS).
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Calculating Depreciation: For every full year a property is in service, you’ll depreciate an equal amount: 3.636% each year as long as you continue to depreciate the property. If the property was in service for less than one year (for example, the trust acquired the house in May and began renting it in July), you would depreciate a smaller percentage that year, depending on when it was put in service. According to the IRS Residential Rental Property GDS table attached.
Here is a good online depreciation calculator: https://www.calculatorsoup.com/calculators/financial/depreciation-property-realestate.php
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