Form 8275

[ruthc]

I am filing a return which includes rental property without depreciation for the building. It has never been depreciated. I want to efile the return without the form 3115 in order to get the client her refund without any problems. I will be doing an amended return with the form 3115 after April to include the depreciation. I want to file a Form 8275 to disclose that I will be doing the amendment once the matter can be fully researched. I need to do research on this matter which will take time.
My question is this: The form has an "amount" area that should be filled in. Without knowing what the effect of the cumulative depreciation is, what amount should be entered in this filed? Should I leave it blank and the explanation will explain why it is left blank?

[Nashville]

I wouldn't

Ruth, I wouldn't file it. Your issue with the client's position is limited to the return in question, which I'm assuming is for 2011 only. If you depreciated for 2011 then you are not at odds with anyone.

The sad thing about this is that if the building has been around without depreciation, it must be considered "depreciable" even though not taken. Client can't recover this expense except to the extent you may go back and amend prior year returns. Statute of Limitations is normally 3 years. If building has been owned longer than this, the remainder of the "depreciable" amount is simply lost.

[AZ-Tax]

it must be considered "depreciable" even though not taken

The sad thing about this is that if the building has been around without depreciation, it must be considered "depreciable" even though not taken. Client can't recover this expense except to the extent you may go back and amend prior year returns. Statute of Limitations is normally 3 years. If building has been owned longer than this, the remainder of the "depreciable" amount is simply lost.

When I tell prospects and client this, most think I am crazy. No way they say. One prospect has a rental and told him about it and he replied, how in the world would the IRS catch this.....ah, you will report the sale of your rental on your tax return. I am curious how serious the IRS is on this.

[Gary2]

Is the 8275 ever appropriate to disclose something you haven't done yet? I thought it's strictly for positions being taken on the return, not positions you're planning on taking in an amendment.

[ruthc]

I really didn't know how to handle this situation and was given advice on another forum which made sense, except by not using Form 8275 before I really couldn't decide whether it was necessary or not. I had the same thinking about the form 8275 as you. I had planned on doing exactly what you noted (include it for 2011 and then amend the couple years after). I was advised to do the Form 8275 without including the depreciation and then do an amendment for 2011 with the Form 3115 to include all the back years depreciation.
Now if I do include the 2011 depreciation in the 2011 return, could I amend a prior return and include all the prior allowable depreciation by using form 3115? Or is the correct way to capture all the depreciation to include all allowalbe in the 2011 with the form 3115 attached?
Now I am getting mixed thoughts on this again.

[Nashville]

Making It Hard

Ruth, I still believe you are making this unnecessarily difficult. A form 3115 is for a change in accounting method or procedure. This would be far more sweeping than the mere omission of depreciation for which no established precedent even existed.

I've never done a 8275 either. I'm not trying to sound high and mighty, but if I explain my position as being at odds with what the IRS allows, the client always seems either back off or leave. None of them want an 8275 turned in.

I supposed if a client absolutely wouldn't budge and I filed an 8275 to protect myself, and client was agreeable to it, then I would file it. But that has never happened. Client has always backed off his position or gone across town to find another preparer. It sounds incredible, but we have preparers in my area who don't even know what an 8275 is.