RENTAL CONVERTED TO PRINCIPAL RESIDENCE CONVERTED BACK TO RENTAL

[dkh]

What do I use as the depreciable basis ?   Cost less previous depreciation ?    FMV is greater than cost.

Purchased in 2008.  Rented 2008-2012.  Moved into as primary residence 2012-2023. 

Moved out of primary to move in with family due to age/health issues.  Primary residence is again a rental.

[IRonMaN · Accepted solution]

Go with basis which would be cost less previous depreciation.

[dkh]

I thought so but then started thinking what if there is some crazy rule......

Thank you - appreciate your knowledge.

[IRonMaN]

The worst thing we can do this time of year is to start thinking 😜

[BobKamman]

Excuse me for thinking, but I would go back to the original cost basis and continue the depreciation that was started in 2008.  For example, the basis is $100,000, so in five years the accumulated depreciation would have been $18,000.  Why start figuring depreciation now on only $82,000?  And prolong the depreciation period beyond 27.5 years?  Just keep using $100,000, plus any improvements or adjustments other than depreciation while not rented.  What if the property had been setting vacant all those years, rather than being used as a personal residence?  Where is the IRS rule that says when you have to reset the clock?  

[dkh]

Interesting thought.  I would consider the idea of using $100,00 if it hadn't been a personal residence.  I'm more comfortable with starting with the $82,000.    Client is 80+ years old.  Probably won't see the end of this 27.5yr depreciation.