My grandmother was 50% owner, can we claim depreciation

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glassynails
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My grandmother was 50% owner, can we claim depreciation

Post by glassynails » Fri Nov 03, 2017 2:45 am

Hi.

We sold a house that my 92 year old grandmother left to us (me brother and sister) and her cousin. "We" owned 50% interest and the "cousin" 50%. I'm about to get an accountant as I'm now (finally) wrapping up the estate as executor. I'm just wondering something. My cousin, the other 50% owner claimed 50% depreciation and has the records of all that. Will "we" be able to also claim 50% depreciation? I would think that depreciation is the work that they did to the house over the years. My grandmother didnt keep records, cause she was financially illiterate mostly, but my cousin kept them all.

I'm wondering because we made a rather large gain in profit on the house and want to reduce taxes as much as possible on the gain.
"GLASSYNAILS" on Youtoob for my "no edit" - "no fakery" audio recordings. Just me, my Alhambra 7p spruce, and an Olympus ls-10 portable recorder.

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Andrew Fryer
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Re: My grandmother was 50% owner, can we claim depreciation

Post by Andrew Fryer » Fri Nov 03, 2017 12:17 pm

Will you be asking the accountant for guitar lessons?
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joachim33
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Re: My grandmother was 50% owner, can we claim depreciation

Post by joachim33 » Fri Nov 03, 2017 3:46 pm

Andrew Fryer wrote:
Fri Nov 03, 2017 12:17 pm
Will you be asking the accountant for guitar lessons?
+1

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bear
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Re: My grandmother was 50% owner, can we claim depreciation

Post by bear » Fri Nov 03, 2017 4:52 pm

Andrew Fryer wrote:
Fri Nov 03, 2017 12:17 pm
Will you be asking the accountant for guitar lessons?
:applauso: :applauso: :applauso: :applauso: :applauso: :applauso:
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glassynails
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Re: My grandmother was 50% owner, can we claim depreciation

Post by glassynails » Fri Nov 03, 2017 8:25 pm

Andrew Fryer wrote:
Fri Nov 03, 2017 12:17 pm
Will you be asking the accountant for guitar lessons?
That's funny, cause the same "cpa" made a mistake and told me 6 months ago "Heck, you got nothing to worry about you won't have to pay capital gains anyways". I told him that the property is selling for A LOT more than what it was appraised for and gave him the figures. Now he's telling me that "You made a large gain and need to get a higher appraisal if you can to avoid paying high capital gains." Some expert!

I figure that maybe there are some accountants floating around that could give me a quick answer to ease my mind that's all. I take everything with a grain of salt these days. So called experts are not always right. Heck, even classical guitarists can't figure out the best nail shape after years of playing!
"GLASSYNAILS" on Youtoob for my "no edit" - "no fakery" audio recordings. Just me, my Alhambra 7p spruce, and an Olympus ls-10 portable recorder.

glassynails
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Re: My grandmother was 50% owner, can we claim depreciation

Post by glassynails » Fri Nov 03, 2017 8:26 pm

Andrew Fryer wrote:
Fri Nov 03, 2017 12:17 pm
Will you be asking the accountant for guitar lessons?
Yes! It just so happens that he's a classical guitarist for over 20 years!
"GLASSYNAILS" on Youtoob for my "no edit" - "no fakery" audio recordings. Just me, my Alhambra 7p spruce, and an Olympus ls-10 portable recorder.

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rikart
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Re: My grandmother was 50% owner, can we claim depreciation

Post by rikart » Fri Nov 03, 2017 9:33 pm

Certainly, get an accountant. I would take care about relying on the advice that any of us lovely folk give in this matter. We might of course be well-intentioned, qualified even, but an accountant will (hopefully) have a vested professional interest in ensuring that you are provided with accurate relevant advice based on all the information that pertains to your individual case ascertained from meeting with you to discuss your personal financial circumstances face to face.
That said .....
The house is an asset. The question is if it is a personal asset or a business asset. The cost of depreciation of a business asset is an allowable expense against revenue. When this cost is offset against total revenue it reduces that total to yield a net income, thus lowering the amount of income tax that is required to be paid within a given financial year. Happy days.
If the house was not used for business, then .... :(
Then, there is the splendid issue of Capital Gains tax.
Yes, do get an accountant. A qualified financial accountant.

Oh, and your own personal solicitor.
rikart /warwick harte

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bear
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Re: My grandmother was 50% owner, can we claim depreciation

Post by bear » Fri Nov 03, 2017 10:34 pm

rikart wrote:
Fri Nov 03, 2017 9:33 pm
Certainly, get an accountant. I would take care about relying on the advice that any of us lovely folk give in this matter. We might of course be well-intentioned, qualified even, but an accountant will (hopefully) have a vested professional interest in ensuring that you are provided with accurate relevant advice based on all the information that pertains to your individual case ascertained from meeting with you to discuss your personal financial circumstances face to face.
That said .....
The house is an asset. The question is if it is a personal asset or a business asset. The cost of depreciation of a business asset is an allowable expense against revenue. When this cost is offset against total revenue it reduces that total to yield a net income, thus lowering the amount of income tax that is required to be paid within a given financial year. Happy days.
If the house was not used for business, then .... :(
Then, there is the splendid issue of Capital Gains tax.
Yes, do get an accountant. A qualified financial accountant.

Oh, and your own personal solicitor.
Sound advice, previously given in a half dozen threads.
2013 Jeff Medlin '37 Hauser 640mm sp
2006 Michele Della Giustina Concert 10 string 650mm ce
2005 Jose Ramirez 4E 650mm ce
2005 Manuel Rodriguez Model C3F 650mm sp
2003 Manuel Rodriguez Model D 650mm ce

glassynails
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Location: Westbrook, Maine

Re: My grandmother was 50% owner, can we claim depreciation

Post by glassynails » Sat Nov 04, 2017 12:34 am

Thanks, Yes the house was a 4 unit rental built in the late 1800's. So it was "used as a rental property". My grandmother lived there in 1 unit most of her life and her cousin through marriage owned the other 50%. My nana inherited it through her husband. My father passed the house went to us kids after nana died.
"GLASSYNAILS" on Youtoob for my "no edit" - "no fakery" audio recordings. Just me, my Alhambra 7p spruce, and an Olympus ls-10 portable recorder.

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Paul Janssen
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Re: My grandmother was 50% owner, can we claim depreciation

Post by Paul Janssen » Sat Nov 04, 2017 1:08 am

Hi Glassy,

Captial gains tax is a complex part of tax law and your situation has several variables so I'm not sure it will be possible for any of us to offer you truly meaningful advise.

I'm based on Australia and am not versed in US Tax law so I can't speak specifically to your situation. However, in Australia there are several exemptions on Capital Gains tax on inherited property. For example, inherited primary dwellings are exempt from Captial Gains Tax if they are disposed of within two years. If they are disposed of after that date, for properties acquired before 1985, the cost base is taken from the time that property is passed (i.e. the time of death of the benefactor). So this again helps reduce or avoid capital gains tax when CGT event finally occurs such as selling the property.

My advise to you would be to seek guidance from your accountant on what, if any, capital gains exemptions (or partial exemptions) may apply given that your Grandmother lived in one of the units, which means that part of the asset may be treated as her primary dwelling. You will also want to seek advise as to what date should be used for the cost base for the remainder of the asset (the part used to derive rental income). If this is taken as the date you received the asset then you may not have much of a gain at all.

Please note that I am not saying that this will apply in your situation, but rather offering you some suggestions on the sort of questions you could/should be asking your consultant.

Good luck and b.t.w. I'm sorry for your loss. Grandparents are special people worth more than any house or pile of gold (IMHO).

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Michael Lazar
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Re: My grandmother was 50% owner, can we claim depreciation

Post by Michael Lazar » Sat Nov 04, 2017 2:32 pm

The cost of the building would be the purchase price plus the cost of any additions, expansions or upgrades that would increase the value of the building. Maintenance costs are an operating expense. Depreciation is calculated on the value of the building and has nothing to do with maintenance costs. It is a non-cash expense used to calculate the net income from renting the building. Net income is the total income minus operating costs (including maintenance) minus depreciation. Income tax is paid on net income. If you are receiving all or part of the rental income from the building, depreciation should factored into the amount of income you are taxed on.

If the building is sold for more than its depreciated value the amount of the gain is a combination of recaptured depreciation and
what is known as a "capital gain". Some capital gains are subject to tax and some are not. As for example, in Canada the gain on the sale of a primary residence is tax exempt.

Most of these issues issues will become part of your grandmother's final tax return. The capital gain on the building will need to be based on an appraisal rather than a sale price unless it has since been sold. If the capital gain is exempt from tax on your grandmothers final tax return the question then becomes a matter of estate tax and/or inheritance taxes.

You, as the executor, will be legally responsible for ensuring that this is all dealt with in accordance with your laws. It's very clear from your question that you are not very knowledgeable about these complexities so, yes, you need an accountant who is well versed in estate tax law. This and a few other answers here should help you in determining what person or firm you will end up engaging to do the work.

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