My clients, husband and wife, purchased a land and contracted to build a house on it. The land purchase was only in wife's name, but building contract had both husband's and wife's name. There were separate loans on the land and building, so I understand that the interest on the land loand is fully deductible in wife's name and the building loan is deductible under both their names.
However, how do I split the rental income and rental expenses? Do I have to go item by item to split land tax to wife, building repairs 50-50? Is there a common sense approach to just take 50/50 on all rental income and expenses?
In addition, when they sell the property in the future, how do I portion the capital gains? Do I technically have to get a separate valuation of the land at time of sale?
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