Depreciation missed

[John3cpa]

New client had returns prep'd by "AARP volunteers" at senior center and depreciation on sched E was missed for 03, 04, 05 and maybe more (still to be determined). From my reading of TTB page 9-20, this looks like a 3115 App for Chg in Acctg and then a Sec 481 adjustment on the 2006 return.
Would like some confirmation...thanks

[Gretel]

Yes, that's the way to go. Form 3115 is a pain in the neck, though. Good luck.

[JoshinNC]

But it's a good idea to do it

Because if the property is ever sold the depreciation must be recaptured, whether it was taken or not. This can seriously increase the taxes owed on a sale of a property held for many years, and the client should get the advantage of taking the deduction in the years when the property was owned.

Just did a case where client had rental property owned since the mid 70's that he sold last year. On paper he only made $100,000, but through recapture of depreciation he actually reported close to $160,000. It definately makes a difference.

[solomon]

See

Final Regs. TD 9307.

[taxea]

Depreciation missed

This is a good example of preparing beyond their capability. AARP and other prep volunteers are only trained to do 1040EZ, 1040A and 1040 that includes child care, child credit and EIC....why do they insist on doing returns they don't know how to do? taxea

[solomon]

JoshinNC

See Rev. Proc. 2004-11 Sec. 3. You might still be able to help your client.