Thank You for all your very helpful advice. It reduced my
worries considerably.

It's nice of you experts to participate in forums like this.

Norm

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Frank S. Duke, Jr. wrote:
- quote -

SNIP
- quote -

I fully agree with the rest of this response but not with
the part about depreciation. Depreciation will be based on
the LOWER of the value on the date of inheritance plus any
subsequent improvements OR the value on the date you convert
it to rental property. If the property appreciates before
you make it available for rent, you do not get to increase
the allowable depreciation. On the other hand, you do have
to take any loss in value as a reduction in depreciable
basis.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"Norm" <normowens[at]gmail.com> wrote:

- quote -

No.

- quote -

Income is reportable. Depreciation is required.

- quote -

I don't understand the question. There are no pitfalls in
owning property.

- quote -

A tax accountant.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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normowens[at]gmail.com (Norm) posted:

- quote -

Only to the extent that you can add the expense for major
renovations to your cost basis.

Incidentally, your cost basis should be stepped up to the
value of the home on the date of your last parent's death --
or the date of probate settlement (there are some options,
depending on the specifics of the situation). So your
starting point will be in the $300K+ range -- which you
would be wise to confirm with an appraisal or at least an
expert realtor's evaluation.

- quote -

Yes, depreciation is mandated over 27.5 years for
residential property. Since you are not going to be living
in the area, you would be wise to employ a real estate
manager to handle rentals. For the tax aspects, you should
definitely consult a professional, especially as you first
setup the rental property and file your first return.
Depending on your comfort level with tax prep, you _might_
elect to handle future years personally, but start with
expert guidance.

- quote -

The conversion back to your personal residence will mean
that you would discontinue reporting the property on
Schedule E, and also discontinue depreciation. But the
actual depreciation used would become a factor if you
eventually sell the property, so you should keep complete
records of your tax returns for the years you rented it --
as well as the inherited cost basis documentation.

- quote -

A CPA, EA (Enrolled Agent) or an attorney who practices real
estate law and income tax matters. Since you really _ought_
to employ a property manager/real estate agent to represent
your interests, if you have a good contact for either aspect
(i.e., management or tax advice), you might settle on that
firm or individual and seek their aid in selecting the
second type of professional advisor.

Bill

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Norm at normowens[at]gmail.com wrote:

- quote -

Key point is that the basis of the house is now fair market
value as of the date of death. No capital gains are due
except on future appreciation.

- quote -

All the capital gains were erased when he died.

- quote -

It will become a rental property and you will begin to
depreciate it based on the value it had when you first make
it available for rent.

- quote -

When you die, it will step up in basis again to FMV and your
heirs will owe no tax when they sell it.

- quote -

Repairs to a residence are in no way deductible. Capital
improvements add to the basis to reduce the potential tax on
sale but when your dad died, the basis stepped up to FMV and
eliminated any accumulated tax to that date.

- quote -

Download IRS Pub 527 from www.irs.gov It will tell you all about it.

- quote -

Stop filing the schedule E as a rental property and start
paying the taxes as individuals, deductible on your schedule
A.

- quote -

An accountant who handles rental properties. Most CPAs
should be able to help you with this.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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I recently inherited my parents house. In the 20 months
before their demise, my wife and I lived in the house and
did major repairs (gutted both baths and the kitchen due to
termites.) The house is in California and we call Texas
home. Dad paid $13K in the mid fifties and it's worth $300K
+ now.

We now want to rent the house and return to full time RV'ing
for the next 4-7 years. Then we want to reoccupy and stay
in it until our passing.

My parents had little money and we paid for all the repairs.

My questions:

1. Am I eligible for any tax advantages for the past repairs?

2. Any suggestions on how to handle rental income? Is
depreciation something to do?

3. When we return to the house is there any pitfalls to avoid,
as far as the laws are written now. How will we handle
taxes then, once we convert an income property back to a
residence.

I hope these are not stupid questions. What kind of
professional would best be consulted for this.

Thanks,

Norm

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >