ftis year, Ellen Smith converted her principal residence to rental property. She originally purchased the home 8 years ago for $425,000. fte home was appraised at $356,250 just before she placed it on the rental market. Assuming that $12,500 of the tax basis of the home is attributable to the land on which the home is located, if the home was converted to rental property on June 20, how much depreciation expense can Ellen claim on her current year return?

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Quizplus · Accepted Answer

the property's tax basis is limited to its $356,250 FMV at the time it was converted from personal to business- use property. Subtracting $12,500 for the land, the depreciable basis is $343,750. the house is residential realty and is depreciated using the SL method over 27.5 years using the mid-month convention. ftus, depreciation expense is equal to $343,750 ÷ 27.5 × 6.5/12 = $6,771.

Ftis Year, Ellen Smith Converted Her Principal Residence to Rental