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Claiming Unclaimed Prior Year Depreciation

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    Claiming Unclaimed Prior Year Depreciation

    I have a client who has two rental properties - a commercial building put into service in 2002; and a vacation rental put into service in 2007. There have been some minor assets in the vacation home depreciated over the years but neither the commercial building nor the vacation home themselves have ever had depreciation taken on the real property. (The vacation home is mainly rental with an occasional year that there may have been 10 to 14 days of owner use.)
    To correct the depreciation errors it appears I need to go back and amend the open years returns then file form 3115 and take a Section 481(a) adjustment on the current year return (as "other expenses") for the depreciation that should have been taken on the closed years.
    Does this sound correct? Has anyone had any experience with this or correcting depreciation errors going back beyond open years? I'd like to make sure this is done correctly and minimize drawn out correspondence with the IRS.

    #2
    Don't amend the prior open years. Do everything on the 3115.

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      #3
      The 3115 doesn't actually "do" anything for depreciation corrections - just ask for basic information and answers to yes/no questions.

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        #4
        I agree with Gary. Do NOT amend. It could even invalidate the Form 3115.

        Line 25 of Form 3115 shows what the 481(a) adjustment will be, and asks for the computations to be attached.

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          #5
          And Schedule E of Form 3115 (not to be confused with Form 1040 Sch. E) asks depreciation-specific questions. If the only purpose of the 3115 is to claim previously unclaimed depreciation, then the other schedules (A-D) can be left blank.

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