Gift Tax and Depreciation

[YUKEM68]

I am still having fun with this return. Taxpayer gifted over all her rental properties to her son. Her adjusted basis was only $31000 on those buildings. I will identify that on GIft tax return as a donor's adjusted basis. She was reporting rental income as a lessor of the real estate for 4 years. The depreciation adds up to $53000 dollars for all those years. What should I do with that depreciation. Will that become an ordinary income for her this year? Depreciation is more than the adjusted basis.

Please help me to figure out what to do with this depreciation....Thanks for any response!

[jainen]

>>Depreciation is more than the adjusted basis<<

I don't think that's possible. Anyway, how do you get that much in just four years? Well, right or wrong, she has reduced her basis to zero in a way that can't be corrected without IRS permission. She should still amend the previous years to reverse the excess deductions, but meanwhile your only real responsibility is to accurately do the current returns.

[YUKEM68]

>>Depreciation is more than the adjusted basis<<

I don't think that's possible. Anyway, how do you get that much in just four years? Well, right or wrong, she has reduced her basis to zero in a way that can't be corrected without IRS permission. She should still amend the previous years to reverse the excess deductions, but meanwhile your only real responsibility is to accurately do the current returns.

To make it more complicated she had 7 buildings involved and the basis is low because she took over this basis thru like kind exchange. The accumulated depreciation is high because of the value of the buildings are high what she aquired thru like kind exchange. Now she quit claimed all these buildings to her son with no money exchange. I will file a gift tax return for her. I have no idea what to do with all accumulated depreciation....

[kcjenkins]

Something sounds wrong here. You are saying that she has a basis of $31K, and she has taken $53K of depreciation, so her total original cost was $84K, right? If that is the case, the son's basis is also $31K. The lower of her basis or FMV.