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Not a response to you question, but your post causes me to ask how does a SFH ever have a zero basis?

It can't. Or more correctly, it shouldn't. But since we have to deal with depreciation that was allowed or allowable, if the depreciation [incorrectly] allowed equals the original cost, the basis will be zero.

There's also the issue of timing. MACRS started in 1987. And I think that residential real estate has always been 27.5 year property. Therefore, this year - 2013 - would be the final year of depreciation for residential real estate placed in service in 1987.

Now you have got me wondering if I did the depreciation correctly. In this case the rental was placed in service in 1984 and depreciated using ACRS? 20 year S/L MM in effect at that time until fully depreciated in 2004. Yes there were improvements made in later years and they are being depreciated using the MACRS 27.5 S/L MM. Are you saying the current value of the improvements is the property basis to use on Form 4684?

Thanks for your concurrence to chalk the out of pocket expense to repairs.

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