I currently rent one unit of a two family home, 57.5% of the home, and will now rent both units beginning in November, 100% of the home. Excluding the land I had a gross depreciable basis of 111K, which led to a depreciable basis of 63K related to the 57.5% rental portion. I've claimed 5K in depreciation so will need to depreciate based on the 111K basis less the accumulated 5K. I know how to do the math for the depreciation and how to determine what costs to deduct, but I'm not sure if I need to file a new 4562 form for 42.5% now used for rental and depreciate it for 27.5 years, fill out form 3115 for a change in accounting method, or treat this is as a like-kind exchange? Any help on the tax implications for this change would be greatly appreciated.
Rental use change from 50% to 100% business
Nov 05, 2012
2 Replies
"Novice CPA" wrote
Continue the depreciation on the one unit, start the depreciation clock on the new unit being rented. Just treat them as two different assets and you'll be fine.
Thanks for the guidance Paul, I appreciate it greatly. I thought about doing that, but it just seemed too simple.
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