Re: Rental Property Depreciation / Home Office Depreciation
- From: "D. Stussy" <spam@xxxxxxxxxxxxxxxx>
- Date: Fri, 7 Mar 2008 22:27:59 -0800
"Arthur Kamlet" <kamlet@xxxxxxxxx> wrote in message
news:fqsea8$t82$1@xxxxxxxxxxxxxxxxxxxx
In article<b778738f-fc18-4939-a890-3d546865cb45@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>,
<norm.pinnacle@xxxxxxxxx> wrote:
After living in my home for 2 years (and taking the home office
deduction), I moved in January of 07 to a new home. I rented out my
former home starting in Feb 07.
My question relates to taking the depreciation on the home. Do I
start as if it were year 1 or is there some calculation / method to
take in account the depreciation portion of the home office deduction
taken in prior years?
What a wondeful exam question!
The home office asset would be taken out of service and
depreciation suspended, to be recaptured upon disposal
of the house.
The residential rental property would be placed into
service as a new asset with 27.5 yr class life, as of
Feb 2007, at lower of adjusted cost basis (adjusting for
claimed depreciation on the home office) or FMV when
placed into service.
The land asset should be carried along and adjusted.
Example: When placing the home office into service you
figured the office as 8% of the sq ft of the home and
created a land asset equal to 8% of the land itself.
Now you place the whole house into rental service so
create a new land asset for the remaining 92% of the
land.
Why create an asset for nondepreciable property? To help
you calculate gain/loss when you dispose of the property.
I disagree. Placing the remaining adjusted basis into the schedule would
eventually result in a 100% deduction of the structure after 27.5 years -
but FAILS to account for the 92% personal use of the first two years (the
part which was not the home office) which should never be actually deducted
as depreciation.
My answer is that you continue the depreciation schedule, taking a deduction
for 100% of the depreciable part (structure) for the remaining 29.5 years of
the 31.5 year class life that it was originally classified as when you FIRST
placed 8% of it in service as a home office. In this solution, you
certainly don't split the land into two virtual asset accounts.
An asset can only be placed in service once. It can be withdrawn from
service and subsequently returned to service, whereby the depreciation
schedule is continued where it was last left off. I am aware that this
situation has two different purposes that have different class lives (where
the first class life applied is the longer period), and therefore find the
difference in class life irrevelent as one cannot shorten the original
schedule.
Moving out in January and renting it the subsequent February means to me
that it really wasn't ever withdrawn from service but only that the % usage
of the property changed from 8% to 100%. There is continuity of service
even if the purpose changed.
If there's authority for Mr. Kamlet's position, so be it. However, I know
of none, nor will I research for any just for a question on this group.
.
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