Question: How do I record on my taxes a rental house purchase for less than tax value.?
My husband and I purchased his grandmother’s home from his dad and two brothers. One brother forfeited his 1/3 of profit to keep the house in the family. We paid the other brother cash for his 1/3. Once we get the house ready and rented, we will start paying my father-in-law back his 1/3. What value should I use for the purchase price of the home? How will that affect our taxes by paying less than tax value for the home?
Answer by artillerygirl01
It won’t affect your taxes until you actually start renting it out and earning income. You use the purchase price of the home plus any capital improvements you made as your cost basis in the house, and you will depreciate that value over the life of the home, using the IRS depreciation schedule.
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