Inherited Rental Property

Forum|Forum|3 years ago
April 12, 2023
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I inherited a rental townhome from my father who passed away in 8/2022. The townhome transferred to me in 11/2022. The townhome was fully depreciated on my father's tax return for the rental income. The townhome was rented for all 12 months in 2022. I believe my father's tax return can only reflect 8 months of rental income/expenses (Jan through August 2022), is this correct? My understanding is since this property is inherited, I can use a cost basis as of date of death as a starting point to establish depreciation for rental on my own tax return for 2022. Is this correct? I have an appraisal which I will use to establish the cost basis.

How should the 2 months be handled for the time between his death and the time deed was transferred to me? There are HOA fees that were incurred during this time which I paid. Also I paid the annual property tax bill in late November after deed was transferred to me. Since this bill was one time payment but covered the entire year, how should this expense be reflected? All under my tax return or split between my tax return and my father's tax return or something else?

Best answer by Mike9241

Sorry for your loss. rental income/expenses in 2022 should be reported as follows 1/1 to day preceding death goes on his final return. from that date to the date before it was transferred to you it goes on the estate return -1041. and after that your return. it may be that the estate especially if closed out in 2022 would pass it's share of the rental income/loss to you on a k-1. the estate would compute depreciation based on fair market value on date of death after subtracting out the value of the land. you would get the property with the same carryover basis - depreciable basis, land basis and depreciation taken by estate.

Mike9241Answer

AussieAuthor

Thank You

Which version of Turbo Tax is needed for 1041 and K-1?

DaveF1006

You need a Turbo Tax Business return to file your 1041 and distribute the K-1's to the beneficiaries. To report your own K-1 on your individual return, you need a Turbo Tax Premier or higher.

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