rental does it qualify for depreciation

[michele]

New client with trust. Trust not really generating income. Only is about 5000 year for rent. The problem is the rent is not of going rate or value for the property. The trust states that the girlfriend may live there until which sometime that she passes away or marries. she is paying nominal to pay part of the property taxes and insurance. The previous accountant did not depreciate the property. I don't know if it should be. I haven't looked up any information on these kind of situations.  Just reaching out to see if anyone had this kind of situation. 

thanks

Michele

[IRonMaN]

So is she really renting or is she just reimbursing for some of the costs?

[michele]

I don't believe there is a rental agreement  they are just charging her $400 month since she was allowed to stay. So my feeling is not to put depreciation on since I would not classify it as a true rental. I look at it almost like related party deal although she is not related. I don't want to do it just as income forcing them to pay on that income so may just leave it as a rental with no depreciation.

[qbteachmt]

Are you sure this even is a rental? If the trust gives her a life estate, it also should cover who pays for what. That isn't a rental. It's a primary residence. There is a relationship for life estate (possession) with no transfer of the property interest (a reversion).

[IRonMaN]

"The trust states that the girlfriend may live there until which sometime that she passes away or marries"

If the trust doesn't mention anything about charging her rent in the second half of that sentence, I'll go back to my original thoughts.  Sounds like she is reimbursing for some costs rather than paying rent.  I wouldn't pick it up as income.