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Level 5
March 15, 2023
Question

Rental depreciation basis

  • March 15, 2023
  • 1 reply
  • 13 views

T&S purchased residence for $300,000.  T died many years later.  New stepped up basis (including spouse's portion) for residence is $700,000.  S wants to rent residence.  Would the basis for depreciation of the rental house be the $700,000?  If so, do you know a good site for reference?  Thanks!

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1 reply

rbynaker
Level 13
March 15, 2023

Assuming the step-up was done correctly, the basis for depreciation would be the lesser of $700K or FMV (after allocating a portion to land, of course.)

See IRS Pub 551 for "Property Changed to Business or Rental Use".