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Old 02-16-2013, 01:29 AM
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Rental property depreciation for prior years

We purchased our primary home in Nov 2007. The house has an in-law apartment which we personally used when we moved in.

In July 2008 we converted the in-law apartment into a rental unit. The unit has only been a rental since then (no personal use). I have been reporting the income on my returns as well as taking the expense deductions for utilities, trash collection, etc. based on the square-foot percentage corresponding to the apartment (24%)

Out of ignorance however, we failed to claim the depreciation of the rental property in any of our returns from 2008-2011. We will start claiming the depreciation with the 2012 return. I understand that I can file an amended return for each of the last 3 years (i.e. 2009, 2010, 2011). Too late for 2008.

My questions are:

1. Should each amended return assume that the proper depreciation was taken starting in 2008 and work forward from there?

2. I know the cost should be the lesser of the FMV or adjusted basis when it became a rental. Is it reasonable to use a site like Zillow to get the FMV in June 2008? Zillow also has the tax assessments so I can get the ratio of structure to land to exclude the land.

Here is what I'm figuring:

Paid for house Nov 2007: $585k
Zestimate July 2008: $564k
Tax assessment 2008: $163k land (43%), $214k structure (57%)
Square footage of apartment: 24% of whole house

So, COST = $564k * 0.57 * 0.24 = $77.155k

Does this make sense? Sorry for the long post...



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