Sale of rental property

[singh]

My client sold his rental duplex on 01/20/2022. Can I add the cost of capital improvement to the Cost/Basis of home purchased?

Also when he bought the rental property in 2005 the land value was $50,000 and I always subtracted the $50,000 from the purchase price to calculate the depreciation. When he sold this property last year the value of land was $100,000. Can I change the land value to $100,000 so he will have lower depreciation added to his profit? Any input will be appreciated. 

[dkh · Accepted solution]

Yes, capital improvements are included in the basis of the property.   Wouldn't you be depreciating capital improvements or were the improvements made just prior to selling? 

No you cannot change the value of the land.   You have to leave the cost of the property and land allocation as was determined at the time of purchase.       Not sure how changing the land value would lower the depreciation.  

[singh]

Thank you so much, dkh. You have solved my problem. Yes, I checked changing the land value does not lower the depreciation. You are one of the best on this site.

Thank you.

[qbteachmt]

"Yes, I checked changing the land value does not lower the depreciation."

You can't change his Basis. That was determined by his purchase. That is history. You are trying to do something that doesn't apply.

"Value" does not even apply here.

The new owner will use their cost (updated to current) and that is their Basis, going forward.

[singh]

My issue is trying to enter the capital improvements. Can I add the capital improvement costs to the Basis?

[dkh]

Let's start with - when where these capital improvements done? 2022 ?  over several years? 

If done prior to 2022, the taxpayer did not turn the cost in as Repairs & Maintenance and has already taken a deduction?