Rental property abroad - how do i calculate depreciation?

@zlyvyrostekhugo ,   

Which country is the property in ?   Are you a US person ( citizen/GreenCard/Resident for Tax  Purposes ) now?    When did you enter US and with which visa  ?

 Answers to your questions are in italics

1/ What is the cost basis? How do i get it?    When you convert a property from personal use  ( main home or second home etc.), the basis for purposes  of gain  and depreciation is usually the lower of  FMV ( Fair Market Value  at conversion  OR  original acquisition cost plus cost of any improvements.  Based on your  comment about  gain in value  of real-estate in that area, it is probably  the latter -- your acquisition cost plus cost of improvements.

2/ What if there is substantial time between when the property was purchased and put to service for rent (like 20 years) ? Cost of real estate is dramatically different...   answered  above  # 1 

3/ How do i decouple land value and building value abroad, under block house with 48 apartments?     Even in case of  high rises  there is probably an allocated  value of the land -- perhaps you have to  query the local administration --- note that this is based on the  basis  ( i.e. as discussed above ) and a percentage of that.  In the USA , and absent any   property tax records  from the past,  one often would use  a percentage like  1/3  of  land and 2/3 for the building.   A realtor  in the country probably can get a  reasonable figure.

4/ what exchange rate is used?     For basis  it should be at the time of acquisition  or at the time of conversion  ( depending on which is your basis ).  The source of the exchange rate  must be something that is published and/or recognized.  US treasury  has    average annual rates  for  past years, as does  Yahoo financial  .  Note that in general you must  use  similar  time domain  rates  i.e. dollar of the day , or  average  of month, quarter , year etc. through out.  That way you can sustain a challenge ( if so required ).  Keep  your records so you can show  justification of the rate.

5/ Do I HAVE TO calculate and use depreciation or can i simply tax income from the property less the expenses (utilities and insurance)?   Simple answer is yes.  Note that when you actually dispose off  a depreciable asset,  the  accumulated allowable depreciation  reduces your basis  ( for gain computation ) regardless of whether  you chose to recognize the depreciation or not.  Thus it is to your advantage to recognize the depreciation.

TurboTax will do all the computations for you while  you prepare Schedule-E  ( recognizing  your  gross rental income and expenses ).   All you need to do is provide the details it requires for the computation.

In my personal opinion ,   (  I have no financial or otherwise  connection/benefit from Intuit  / TurboTax ),  I would use  Windows download of  Home & Business   to prepare and file the return.  I say this because  this product covers the most complex  scenarios and because all the data stays on my machine  ( for future use if need be ).  Of course , the con is that it is also the most expensive in the product line-up.

Please answer my questions

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