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Tax Law (Questions About Taxes)/Depreciation on Rental Property

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Question
We purchased a home in 4/2003 and lived in it until 9/2006 when we converted it to rental property.

#1 Is the placed in service date the date we began living in it or the the date of conversion to business use?

#2 I understand that for Cost Basis I must use the lesser of Fair Market Value of the home or our cost plus improvements. The Fair Market Value of the structure on 9/2006 was 129,950, much less than the cost we paid plus the $$ we spent on improvements. Since these improvements (new roof, new A/C system, kitchen remodeling) were done to the structure prior to converting it to business use, can we list these improvements separately for depreciation or is depreciation only allowed for improvements/additions made after the date it was placed in service?

Thank you!

Answer
Ronda,

Thanks for your question.

1. The placed in service date is the date is was placed into service as a rental unit.

2. No, the improvements were in place when it was converted, they are included in the FMV on teh date it was placed in service.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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