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Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: some questions about rental RE Date: 10/13/2008 8:12 AM
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First, I'm wondering about this. Suppose I buy a rental property in one tax year but place it in service in the next tax year. As I understand it, I can start depreciating the property and taking deductions for repairs, etc. as of the time that I place it in service. But, the question is, what happens to my expenses after I purchased the property but before it was placed in service? I'm thinking about, for example, lots of clean-up, re-painting, and even tax and insurance. (Can I then start to deduct these things after I've placed the property in service?? Are they part of the determination of the basis?? Do these costs just "evaporate"??)

Second, suppose I make an improvement to the property that must be capitalized and depreciated. I believe such improvements must be depreciated over 27.5 years, BUT the 27.5 years of the original property, and the 27.5 years of the improvement, are different. So, do I start depreciating the second one in the year I make it? (And thus, any later improvements in the years I make them?) Then, all these different schedules of depreciation will have different ending points too -- and their own basis. Then, if I later sell the property, am I to add together all the bases?

A further question that builds on the previous one is this. Suppose I install property that would otherwise be 5-year property or 7-year property in my rental unit. Now, does it become depreciable on a 27.5 year schedule because it has become part of my 27.5 year rental? (Or is that stuff going to have its own schedule of depreciation?)

--SirTas
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