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Depreciation recapture

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Level 10

I should know this, but. Client rented out part of her home. She died, and her estate sold the property.

I have the date of death appraisal. I am splitting the sale, but I need to know whether or not the depreciation claimed during the rental still needs to be recaptured. I think not, but still want your thoughts.

TIA.

** I'm still a champion... of the world! Even without The Lounge.
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6 Replies 6
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Level 15

No. Estate gets a fresh start.


ex-AllStar
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Level 11

Why are you splitting the sale?  Was the rental continued after her death? 

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Level 10

Thanks, and yes, the rental continued after her death, but there was no more depreciation. Asset was completely written off.

** I'm still a champion... of the world! Even without The Lounge.
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Level 8

Doesn't depreciation start all over again after the property is inherited?

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Level 15

Yes it does.


ex-AllStar
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Level 10

I'm (mistakenly?) under the impression that the sale was in the same year as the death.  I think for short-lived assets (appliances, furniture, etc.) there's no depreciation if placed in service and sold in the same year.  I seem to recall someone telling me that the rule is different for real property because of the mid-month convention but I've never had to look it up.  So you might have a few months of depreciation on the rental activity that then gets treated as Unrecaptured 1250 gain but I can't imagine it will be too much.

Edit: A quick look in Pub 946, page 6, second column (2019) says this:

you cannot depreciate the following property.
• Property placed in service and disposed of in the same year

https://www.irs.gov/pub/irs-pdf/p946.pdf