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Old 02-27-2011, 01:45 PM
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Rental Property Cost Basis and Depreciation

I inherited a rental property when my father died in 2009. The property was in my deceased mother’s trust. I thought I would get a step up in basis based on my father’s death date. The estate attorney says that my father had a “life estate” in the trust and that my basis is from 1998. My father continued to file his tax return as they always had using the cost basis from 1978 instead of taking a step up 1998. The property has always shown a loss. In doing back taxes from 2007, I was naïve and reported major capital improvements as repairs. My question is: should I file an amended return for the last three years using the step up in basis for depreciation? Should I move the capital improvements from repairs to depreciated expenses? Will I end up paying more or less when doing my 2010 tax return on the sale of the property depending on amending the returns?

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