Recaptured Depreciation Hi,
I have some questions about recapturing depreciation. Currently, our house is taking depreciation because the previous owners had depreciation taken and it was gifted to us (2 people). So if we sold the property in the future, depreciation would be recaptured and so, there is a 25% tax on that and there is an additional tax of 15% for capital gain?
My question is that since the property was given to the two of us and that on each of our tax return the property is stated at full value and depreciation is taken, does that mean each of us will have to pay the tax on the recaptured depreciation and capital gain? Essentially doubling the 25% to 50% and 15% to 30%? Cause I think that is what the tax accountant did and we filed without understanding it cause we assumed he did it right at that time.
My second question is what triggers this potential tax payment. Is it if the house is sold? And does that include transfer of ownership (e.g. I give my 50% ownership to the other owner without anything in return, essentially a gift)?
My third question is that if we keep it till we die and just in our wills give it to the next generation, do they have to pay the recaptured depreciation? Will the FMV at date of latest death be the new cost basis?
Sorry for so many questions, I asked my accountant and he said some confusing stuff but never answered my questions. He went in a loop, I think.
Thanks! |