Rental House Basis

[mar14]

If too small a basis was used on a rental house from 2005 to present can you fix it with Form 3115? Or do you just go forward with correct BASIS?

[TaxGuyBill]

No, using an incorrect Basis is a "mathematical or posting error" which can not be fixed by Form 3115. Just move forward using the correct Basis. You do have the option to amend the 'open' years, but depending on the amounts, it may not be worth doing it (your fees to amend may exceed any potential saving of tax).

[BOB W]

Do the client a favor and add the error to land. When the client sells the property, their gain will be less.

[TaxGuyBill]

Do the client a favor and add the error to land. When the client sells the property, their gain will be less.

So you think falsely allocating an incorrect Basis to the land is the best way to go?

[BOB W]

I do. The whole return is False. Even if you add it to depreciable side you would have to deal with allowed/allowable issues upon sale and someone will probably not deal with past allowed/allowable. And how do you know that is not the land portion?

Mar14 needs to fully examine original purchase documents with basis used for depreciation to get the difference and also review the allocation used for land and building, There was probably no allocation to land. I've seen this problem many times, no land listed.