If after a few years of actually acquiring a rental property, the local government suddenly changes the allocation of land and building valuation for property taxes: what do you do for depreciation?
Example: (note: no improvements at all were made during this time)
7 years ago: land value 295,000 building value 5,000
now: land value 110,000 building value 250,000
What are the options:
Do you stay the course in the future and continue to not depreciate anything?
Do you start depreciating based on new property tax appraisal/assessment?
Do you have the option to choose, or must you do one or the other? Will IRS assume you should be depreciating and get hit with some recapture in the future, even if you didn't depreciate anything?
Example: (note: no improvements at all were made during this time)
7 years ago: land value 295,000 building value 5,000
now: land value 110,000 building value 250,000
What are the options:
Do you stay the course in the future and continue to not depreciate anything?
Do you start depreciating based on new property tax appraisal/assessment?
Do you have the option to choose, or must you do one or the other? Will IRS assume you should be depreciating and get hit with some recapture in the future, even if you didn't depreciate anything?