Rental conversion issue

[Margaret CPA in OH]

Client bought 2 family in 2008 and rented about half (45%) until August 1, 2011, when client bought single family home and began renting former principal residence Sept.1 after fixing up. Coincidentally auditor revalued property Sept. 4, 2011, and it increased surprisingly so I have means to determine the depreciable value (< cost or fmv, right? However, what about the amortization of the original capitalized closing costs and mip? Do I begin with the percentage of the remaining balance for the remaining years, skip altogether or something else?

It was not very nice to spring this on me just bringing in Monday evening not to mention the 3 other rental properties. I can't even get to an amount to extend there are so many missing items - grrrrr!

Edit - In 2008 I allocated new roof, electrical, and plumbing. Now take any of that? It doesn't seem quite right to take full value but just the purchase price isn't the whole basis either. So percentage of remaining life or something else? Thanks!

[JohnH]

As far as the estimate is concerned, you could count all the income and none of the expenses (or else just the ones which are a definite "yes"), then tell him how much the tax will be based on that figure. If he wants to pay less it's his call, but at least you're putting the decision where it rightfully belongs.

[Margaret CPA in OH]

Thanks, JohnH, I do realize that option but they don't have lots of extra cash available and I guess I'm kind of a softie. Still if I don't get needed info tomorrow and some help/advice on the items I questioned, I'll just aim high and remind him that this all could have come in, oh, 6 weeks ago!

[JohnH]

I'm a softie too.

I'll reduce the amount they pay down to anything they like - provided they understand it's their decision, not mine.

[grandmabee]

I think it is the lower of cost basis or fmv when converting. So it would be cost basis and also pick up the roof on that side

[Margaret CPA in OH]

I was/am pretty sure about the cost issue. What I am less certain about is the roof (balance of original cost or depreciated amount? over 27.5 years or only balance of time from original date?) and the closing costs and mortgage insurance premiums which were added to the basis (appropriate percentage) when first unit placed into service. Makin' me crazy and at this point in time it isn't taking much! I just ate a huge piece of birthday cake to keep me going a bit longer.

[Margaret CPA in OH]

So any other input about the closing costs and mip allocated with the original purchase? Now would be a great time to have the blessing of KC and jainen opine with their collective wisdom - I am sadly without any on this.

Thanks to any one with suggestions or, even better, the right answer!