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Megan C
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How to determine basis for gifted rental real estate when property

Resolved Question:

How to determine basis for gifted rental real estate when property values have dropped so much since original purchase? Members of rental real estate LLC contributed a personally owned property to the new company. They (husband and wife) had received rent for the property the previous four years as commercial property (small office use), but I can find zero evidence from their personal tax returns that they depreciated the property, just showed the rental income on Sch E. They then "gifted" this property over to the LLC when it was formed in 2009. They paid $200K+ for it in 2005, and current tax assessment (2012) shows property value at $180K+.
Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

Thank you for your question, and thanks for using JustAnswer.com. The basis of gifted property is the same as the basis of the original owner. So, your basis would be the $200,000 less any depreciation they took personally. Now, the IRS imposes depreciation whether or not you claim it on your return

MyVirtualCPA :

so you would need to take $200,000 and then subtract out what they should have taken as depreciation up until the property was gifted

MyVirtualCPA :

The amount then would be their basis in the corp, and they would start over with a new set of depreciation on the new basis.

MyVirtualCPA :

Do you have any further questions?

Customer:

Current market value does not affect the basis?

MyVirtualCPA :

No, it does not. Basis of gifted property is basis of donor

Customer:

Thank you for answering my question. Have a great day!

MyVirtualCPA :

You too. Please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Finance Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thanks, Terri for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, or social security needs. It was a pleasure working with you today.
Customer: replied 1 year ago.

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Expert:  Megan C replied 1 year ago.
Thanks!

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