Depreciation and form 3115

[LBR]

A new client owns a commercial building and has been renting it out since 1995, she sold the building in 2015. Her basis is $478,427.00.
Her previous CPA did not expense some capital improvements dating back to 2005.
Should I amend her taxes depreciating the improvements for each year or use form 3115 to reduce the amount she will owe due to the recapture of depreciation upon the sale of the building?
If I use 3115, how would I show the depreciation of the improvements?
Thank you.

[TaxGuyBill]

Double check that they didn't deduct the full amount of capital improvements as a current-year deduction in 2005.


Unfortunately, you need to use form 3115 (with code #107).

In connection with Part IV, Question #25, you will include an attachment showing the "impermissible" depreciation ($0 for each year) and the proper "permissible" depreciation. You will probably also want to reiterate the calculations in detail for Schedule E, Questions 4-7.

[LBR]

Thank you!

[Roland Slugg]

I just want to emphasize and underscore a portion of the first reply to your question: Be VERY careful and make absolutely CERTAIN your understanding of the history is correct. I have no way of knowing for sure, of course, but I am highly skeptical that the information in the OP is, in fact, correct. My doubt is based primarily on the fact that if the 2005 improvements were at all significant, then they were very likely taken into account in some way. Additional doubt was added by your statement as follows:

Her previous CPA did not expense some capital improvements dating back to 2005.

Fine, they weren't expensed. They were probably capitalized.