My client has co-owned rental properties with a friend for several years. During those years they have shared in the rental income/expense 50/50. In 2007 they decided to do a like kind exchange to effectively buy eachother out of the properties. They are in the process of doing this now.
Once they determined the property each of them would be taking, they each took over the property at the beginning of 2007 even though title won't transfer until sometime this year. Effective 1/1/2007 each took 100% of the expenses/income for one of the properties. On the tax returns, would I just take the 100% of income/expense for the property my client actually received/paid, or would I take 50% of the rental income/expense for each property since it is still legally 50/50 on the title.
I get really confused when I think about depreciation, because obviously he can only depreciate the 50% of the house that is his, right?