Daughter-in-law has photography business in operation for several years. She has never qualified for home office as she didn't have any place that was used exclusively for the business. Now they have converted the garage to a studio.
House was purchased in 2014 for $325,000 - they've done extensive upgrades so FMV is about $680,000. Tax bill for last year showed $687,987 with building at $493,070 + land $194,917 (72% building/ 28% land) Ordinarily I wouldn't take tax numbers, but they are actually pretty close to a real estate value. Adjusted basis would also be close, I just haven't gotten the final numbers together.
During 2018 they did a lot of upgrades to the garage/studio in preparation for using it for photo shots and office space - $20K+ and it was put into service 1/1/2019.
Earlier response on this topic said to use the FMV or the adjusted basis whichever is lowest at the time it is converted to home office.
I'm now into doing taxes using Turbo Tax and they ask for date of purchase and price at the time - with no follow up place to enter additional information that I can find. It does show the date of service as 1/1/2019. It is calculating depreciation based on the 2014 numbers using the correct for percentage of square footage.
So do I take their numbers? Do I enter the FMV or adjusted basis whichever is lower?
Any help appreciated.