Amending the cost allocation on a QOZB Property

[DebitThatCreditThis]

QOZB property was purchased in 2021. Currently prepping 2022.

Cost seg study was done around time of purchase.

Now, client is looking to amend the allocation between land and building.

He believes land should be more. Substantial improvement test would also be easier to pass.

Couple questions rise from this:

- Client has a new appraiser that is giving him more favorable allocations. While it's true that the land might be worth more now, obviously he can't use a current year appraisal as support for changing a prior year allocation. Is there any justification he can get from the new appraiser for this change?

- Say the change makes sense, would an amendment or a 3115 be appropriate? I know allocation to land is looked at closely, would either option raise eyebrows?

- If the land allocation is amended/updated, would that negate the entirety of the initial cost seg study?

[Snaggletooth]

In general, a more favorable allocation to land would result in less depreciation to the other elements, So the IRS would be the favorable party in the result.

Note the emphasis on "in general."

Also, not sure a 3115 would be required on a change in "estimate." I would think it would be required on a change in methodology or election.

There is no telling what the IRS would do with such an amended return. But my guess is "nothing."

I hope this will attract more comments. I'm not the brightest bulb in the room.

[TaxGuyBill]

He believes land should be more.

MORE to the land? So he thinks there should be LESS depreciation for the building and other assets?

An incorrect Basis is corrected by amending, not Form 3115.

If the price of the land is adjusted, how is he proposing to adjust the other assets? Would each asset be proportionately adjusted, or is he trying to allocate the entire adjustment to one or more specific assets? If he thinks the original Cost Seg was wrong, how is he arriving at the cost of all of the other assets?