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Step-Up Basis for Assets Associated with Residential Rental

hmosbergea
Level 3

How to determine step-up basis for assets with useful lives from 5 to 27.5 years that accumulates with rental over several years that hasn't fully depreciated?

Ex. 1: Kitchen cabinets purchased new in 2012 for $18,000. Life - 27.5 years. Adjusted basis as of dod = $13,095. FMV?

Ex 2: Fence costs $636 in 2012. Life - 15 years. Adjusted basis as of dod = $309. FMV?

Ex 3: Carpet for all rooms purchased new in 2018 for $7,000. Life - 5 years. Adjusted basis as of dod = $3,360. FMV?

 

 

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TaxGuyBill
Level 14

It is not easy, but that is something that the client needs to research.

Unfortunately, for these types of things there isn't an easy way to figure it out.  You can't really search eBay or Craigslist to figure it out.

One POSSIBLE method would be to estimate the real life expectancy and base things on that.  So although carpet is depreciated over 5 years, if the client antipates it will be worn out and replaced when it is 10 years old, it could be logical to estimate the FMV of the 2-year-old carpet is 80% of the original price (8 more years out of expecting it to be used for 10 years).

 

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TaxGuyBill
Level 14

It is not easy, but that is something that the client needs to research.

Unfortunately, for these types of things there isn't an easy way to figure it out.  You can't really search eBay or Craigslist to figure it out.

One POSSIBLE method would be to estimate the real life expectancy and base things on that.  So although carpet is depreciated over 5 years, if the client antipates it will be worn out and replaced when it is 10 years old, it could be logical to estimate the FMV of the 2-year-old carpet is 80% of the original price (8 more years out of expecting it to be used for 10 years).

 

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sjrcpa
Level 15

Personally I'd ignore those bits and just use the appraised date of death FMV of the property.


ex-AllStar
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