I'd like to buy the interest in a small pship that holds 1 propert. Purchase price was 400k. Current value 675k, loan of 270K on property. What is approx value of pship

Forum|Forum|3 years ago
May 24, 2022
3 replies
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Owners haven't taken depreciation and have rented it a break even for 3 years.

TurboTax Online

Best answer by Anonymous_

@Jeff D2 wrote:
Owners haven't taken depreciation and have rented it a break even for 3 years.

That, itself, presents a huge issue. Depreciation on rental property is taken (deducted) each and every year until the entire basis (typically the purchase price allocated to the depreciable property) is recovered.

The equity appears to be $405,000 but there are other variables.

As a result, you need an in-person consultation with an attorney or financial advisor (preferably both) who can evaluate the investment.

Anonymous_Answer

Employee

@Jeff D2 wrote:
Owners haven't taken depreciation and have rented it a break even for 3 years.

The equity appears to be $405,000 but there are other variables.

As a result, you need an in-person consultation with an attorney or financial advisor (preferably both) who can evaluate the investment.

Mike9241

I agree with @Anonymous_ see a financial advisor and tax pro. failure to take depreciation is a huge red flag. there may be other issues such as have they filed partnership returns. =other than depreciation does its method of accounting comply with the tax laws. with depreciation, there would be losses and these would be passive which means you might not get any tax benefit until the property is sold.

Carl11_2

Employee

have rented it a break even for 3 years.

I seriously doubt that. Especially with a mortgage on the property. But the depreciation issue is a big one. Were I in your shoes on this one, I would have walked away from it yesterday.

Anonymous_

Employee

@Carl11_2 wrote:

have rented it a break even for 3 years.

I seriously doubt that. Especially with a mortgage on the property.

Except in this case the mortgage and the foregone depreciation deductions come close to cancelling each other out. Actually, the mortgage payment is probably less than the depreciation deduction.

SweetieJean

Employee

Unfortunately, many taxpayers miscalculate what "breaking even" means for tax purposes. It is not the property's cash flow, as one cannot deduct the mortgage principal payments,