My friend and I own a duplex which we recently converted into 2 condos. We owned the duplex 50/50, and took depreciation since purchasing it. We completed the condo conversion last year, but I don't know how to account for this on my tax return.
How do I show that I went from owning a 50% interest in one house to a 50% interest in two condo units? Is it a like-kind exchange?
In my opinion, you still own the same property. You have only subdivided your property into two separate properties. As far as your tax return in concerned, I would report two properties on my Schedule E instead of just one as you had done previously.
Keep the same depreciation schedule you had before, just allocate half of your cost basis (and remaining depreciation basis) in the duplex to each condo. Continue depreciating over the remainder of the depreciation schedule.
Subdividing your property and converting to condo comes at a price. You incurrred survey costs, recording fees, legal fees to draft condo association bylaws, separate metering installation and hookup costs for power, water/sewer, gas, etc.
Consult your CPA for specific details on how to capitalize these costs and your tax reporting.
Thank you very much. I greatly appreciate your help.
Hi-
We had 1 duplex and 5 houses on two parcels and performed parceling to put each unit on its own lot- there was a bit of development involved. All depreciation stayed common. Upon selling the duplex, costs were divided on a per living unit basis, but other methods could have been used, according to our CPA. The various development costs are amortized over different periods, depending on the type-