On Form 3115, Can I do this?

[Kram BergGold]

Looking over a new client's 2004 and 2005 return (2006 and 2007 have not been filed) I noticed that the CPA who prepared the returns did not reduce the depreciable basis of a rental home by the land value. What I would like to do is an amended return for 2005 and then on the 2007 return attach a Form 3115 to add in the overstated 2004 depreciation. Can I do this, or both years have to be fixed on form 3115 since 2004 is beyond the SOL? In 2004 and 2005 the extra depreciaiton saved zero tax. I am trying to fix things so as not to cuase the taxpayer to pay taxes on overstated depreciation which saved nothing on the original returns. any depreciation added to 2006 will cause addtional taxes to be owed so I definately don't want to do that.

[ED SMITH]

You are not changing the method of depreciation, only correcting the basis, therefore, form 3115 is not required. The prior returns can be amended.

[erchess]

I was taught that you are asking for an audit

if you change depreciation. My instructors would have told me not to amend over depreciation period but to follow what you inherited just being careful to stop depreciating when the correct basis has been claimed and if the number of years is wrong, oh well. I always used to wonder how I was supposed to sign that the returns were true and complete to the best of my knowledge but as long as I worked for a firm that gave me this advice in writing I followed it but I sure did keep the writing. Now that I am on my own I think that I would probably just reduce his basis going forward because I think the people who taught me what they taught me had experienced audits caused by amending for depreciation.

[Kram BergGold]

Amending 2004

Can I amend the 2004 return which is beyond the SOL?
I will add, amending will not cause a refund as there was no tax liability on the original return nor will there be on the amended.

[DTS]

Depreciation

I've been told the IRS does not even keep track of depreciation, at all. Twice I tried to get past depreciation schedules for new clients and they do not have it to give.

[erchess]

Yes

You can amend any return period. You just can't get a refund after the sol has expired.

[Gretel]

if you change depreciation. My instructors would have told me not to amend over depreciation period but to follow what you inherited just being careful to stop depreciating when the correct basis has been claimed and if the number of years is wrong, oh well. I always used to wonder how I was supposed to sign that the returns were true and complete to the best of my knowledge but as long as I worked for a firm that gave me this advice in writing I followed it but I sure did keep the writing. Now that I am on my own I think that I would probably just reduce his basis going forward because I think the people who taught me what they taught me had experienced audits caused by amending for depreciation.

I have filed form 3115 for a client about 3 years ago. No audit yet. He was selling assets and depreciation had never been taken but, of course, was considered to be taken...depreciation allowed or allowable.

[erchess]

Gretel

For one thing it's possible that I was misled - not deliberately but still misled. It's also possible that this facet of IRS behavior has changed.

[PIGLEE]

You need to check carefully, the basis on the old tax returns. I have discovered that there are some accountants show the basis for depreciation only. They have already deducted the land value, but they do not show in on the depreciation reports. I have discovered that all I have to do is add another line to the depreciation for the land value (for information only). No amendments needed.