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August 25, 2023
Question

Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

  • August 25, 2023
  • 1 reply
  • 0 views

In 2010, I bought a rental property with a friend with each of us having 50% ownership.

In 2019, I bought over this 50% from my friend, making me 100% owner of this property. 

For 2019 I added this newly acquired 50% into the property depreciation report.

 

From 2010 to 2018, the original property depreciation is reported at 50%.  

In 2011, we performed remodelling and depreciation report is at 50%. 

How should I handle this from 2019 onwards ?

 

1 reply

August 25, 2023

for your original 50% you should have been taking 100% of yearly depreciation using only your cost not 50% on 100% of cost (my opinion)- i'll skip on whether you should have been filing partnership returns for the years your friend had his interest.  

you now create a second asset for what you paid your friend and start depreciation with the purchase date in 2019

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for the 2011 remodeling you should have only included 50% of the cost and taken 100% of the yearly depreciation

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when you bought your friends interest you also bought the improvements so there is no separate asset for this

 

Employee
August 25, 2023

I agree with Mike9241 but believe you can get around filing a partnership return by virtue of Section 301.7701-1(a)(2).