 Payments added to capital account. Payments earmarked for a capital asset or improvement or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. For example, you can't deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. Treat as a capital cost the amount you were assessed for capital items. This can't be more than the amount by which your payments to the corporate corporation exceeded your share of the corporation's mortgage interest and real estate taxes. So you can see where kind of the complexity comes into play because now you have to parse out the depreciation. You have to kind of figure what that's going to be. And then if there's improvements, if you're paying for improvements in the building, those again would usually be capitalized items that you would need to depreciate instead of expensing at the point in time that they happen. So your share of interest and taxes and your share of interest and taxes is the amount the corporation elected to allocate to you if it be reasonable, if it be reasonably reflects those expenses for your apartment. Otherwise figure your share in the following manner. So now you've got the interest and taxes that the corporative itself might do a reasonable allocation to try to allocate the interest and taxes because now the corporation itself as the corporative like as a separate legal entity is going to be dealing with paying the interest and taxes for everything, right? And you get but you should be able to be deducting the part of the interest that's applicable to you and the taxes if you're renting your place in the corporative. So now the question is well how do you figure out your portion? Well maybe the corporative itself will do that with some reasonable method. If they do not, then you got to calculate that. One, divide the number of your shares of stock by the total number of shares outstanding. That gives us your percent interest in essence, including any shares held by the corporation. Two, multiply the corporation's deductible interest by the number you figured in one. This is your share of the interest. So fairly straightforward calculation, not too bad. Three, multiply the corporation's deductible taxes by the number you figured in one. This is your share of taxes. All right, next situation. We've got property that's changed to rental use. So possibly it was personal in use and then we changed it to rental use. So the issue there often becomes around the basis or the cost of the property because you bought it some time ago. When you bought it, you bought it at fair market value, but now when you changed it to rental use, then the fair market value could have changed, for example, and you got to deal with that depreciation situation again. So if you change your home or other property or part of it to rental use at any time other than the beginning of your tax year, you must divide yearly expenses such as taxes and insurance between rental use and personal use. So now you've got this mid-year kind of problem because you changed from personal to rental in the middle of the year. So you can deduct as rental expenses only the part of the expenses that is for the part of the year the property was used or held for rental purposes. You can't deduct depreciation or insurance for the part of the year the property was held for personal use. However, you can include the home mortgage interest in real estate tax expenses for the part of the year the property was held for personal use when figuring the amount you can deduct on Schedule A. Example, so your tax year is the calendar year. You moved from your home in May and started renting it out on June 1st. You can deduct as rental expenses 712th of your yearly expenses such as taxes and insurance, which makes sense because that's 712th is the ratio of 7 over 12 months, right, the year that you rented it. Starting with June, you can deduct as rental expenses the amounts you pay for items generally build monthly such as utilities when figuring depreciation treat the property as placed in service on June 1st. So now we that's when that would be like if we bought the property and placed it in service or something like that similar situation because that's when we put it into the rental side of things from personal side of things. Now we have the basis issue so it's so it's like okay so now I know when to put it on the books what am I going to put on the books for because I didn't just buy it. Basis of property changed to rental use. When you change your property you held for personal use to rental use for example you rent your former home the basis for the depreciation will be the lesser of the fair market value or adjusted basis on the date of conversion. Now this makes sense if you think about it because let's say you bought the property a long time ago for a hundred thousand dollars and now it's going up to a hundred and fifty thousand dollars and you're converting it from personal property to rental property. If you were able to just put it on the books at a hundred and fifty thousand the higher fair market value you would have gotten what we call a step up in basis which is a good thing usually you would like to be able to do that but notice what happens now is is you didn't realize the gain of the fifty thousand so usually if you if you sold the home for a hundred and fifty thousand and you cost a hundred thousand you'd have a fifty thousand dollar gain that might be exempted in that case if it was your personal residence but you have that gain situation and so you can't just wipe out the gain by saying well now i'm going to put it on the books at a hundred and fifty thousand and be able to depreciate and get a hundred and fifty thousand worth of depreciation or if i sell the rental property i've got this stepped up basis so so the higher basis is usually good we want to have a higher basis and the iris is you know going to be skeptical to step up the basis so so that would kind of make sense