No, not a newly-discovered Lamour-Hope-Crosby flick nor a new religious biopic. Rather, CSTJ Lewis (“Just Love That Name”) Carluzzo explicates a conversion from personal use to production of cincome (rental on the road to deductible depreciation.

Sherman Derell Smith, T. C. Memo. 2025-24, filed 5/24/25, was a mere five (count ’em, five) years late with his year at issue return. CSTJ Lew says “we suspect that if the return had been timely filed, then this case would not have materialized.” T. C. Memo. 2025-24, at p. 2. Sherman settled out everything with IRS pretrial, except depreciation on his brother’s house, in which Sherman bought a share. Sherman and Bro converted to rental, and Sherman claimed his share of depreciation.

For depreciation one heeds basis. “If, as in this case, property that was not originally held for the production of income is subsequently converted to such use, then the property’s basis for computing depreciation is the lesser of the fair market value or the adjusted basis on the date of such conversion. Treas. Reg. § 1.167(g)-1. Although we agree that petitioner did the best he could under the circumstances to estimate the rental property’s (1) fair market value and (2) adjusted basis at the time of conversion, the evidence he offered to establish those amounts for purposes of that comparison is lacking.” T. C. Memo. 2025-24, a p. 3.

Sherman used filing-year market numbers, not year at issue. Even if he got the FMV for year at issue right, he still can’t establish his basis at date of conversion. He took over Bro’s mortgage when he bought his share of the property, but though he honestly tried, he couldn’t reconstruct the numbers provably.

Had he filed timely, he might have made the cut.