Inherited Rented Farmland

[neilbrink]

Client inherited farmland last year which she is renting out. Part of the Farlmland was tiled in 1999 and 2000 that was being depreciated. The land was in a trust briefly before the assets were disbursed. The person who prepared the trust is telling my client that she can begin the depreciation over again for the entire original cost of the tiling done back in 1999 and 2000. Can someone take me through the reasoning behind this process? Thanks. Neil

[kcjenkins]

What happens is that she gets a step up in basis for EVERYTHING she inherited, so HER basis in the tiles is their fair market value at date of death. So, just like she gets to depreciate the buildings she inherited, based on FMV, starting from the date she inherited it, same thing goes for the tiles. And the fences, and anything else she inherited that is depreciable. So the advice is almost correct. She can depreciate, but it's based on the FMV, not the original cost.

[neilbrink]

What happens is that she gets a step up in basis for EVERYTHING she inherited, so HER basis in the tiles is their fair market value at date of death. So, just like she gets to depreciate the buildings she inherited, based on FMV, starting from the date she inherited it, same thing goes for the tiles. And the fences, and anything else she inherited that is depreciable. So the advice is almost correct. She can depreciate, but it's based on the FMV, not the original cost.

Thanks, KC.