depreciation basis in cash out refinance

[Michael Bertsch]

Question for you CPA's. Let say you pay $75k cash for a house. You renovate it and a few months later it appraised for $125k. Now you do a cash out refinance at 75% LTV on the $125k. Land is valued at $20k Can you start your depreciation basis with the $125k-$20k(land)? Or does it have to be the amount you initially paid for?

[Jenny Bayless]

Hi @Michael Bertsch

It would be what you purchased it for (less land) plus improvements performed as part of the rehab prior to putting the property in service.