Incorrect cost basis on a rental property for 10 years. Didn't separate out the cost of land, and depreciation taken has been tad high per year. What is best solution?

Forum|Forum|3 years ago
January 28, 2023
1 reply
0 views

Is it better to just let this continue on, and then deal with any additional tax liability when I sell it. I would rather fix the amount I am depreciating every year to reflect the amount still available to depreciate for the remaining 17.5 years, but amending 10 years of tax returns doesn't sound appealing either. I just don't want to over depreciate. I still have about 13.5 years before that would happen. Looking for the most straightforward and logical solution - and least painful. Could I fill out a form 3115, but not amend any returns? Any help is much appreciated.

TurboTax Online

Anonymous_

Employee

@mcato3 wrote:
Could I fill out a form 3115, but not amend any returns?

See https://www.irs.gov/publications/p946#en_US_2020_publink1000107386

A change in the cost basis of the asset is really not a change in the method of accounting for depreciation.

ErnieS0

Yes. You can fill out Form 3115 and not file any amended returns. If you file Form 3115, you will have a one-time “catch-up” adjustment for incorrect deprecation and will then claim the correct amount going forward.

About Form 3115, Application for Change in Accounting Method

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Anonymous_

Employee

@ErnieS0 wrote:

You can fill out Form 3115 and not file any amended returns.....

@ErnieS0 Do you have a cite for this proposition?

I do not believe that using an incorrect cost basis would be considered an impermissible method of accounting for which Form 3115 could be used.

See Section 1.446-1(e)(2)(ii)(d), the relevant language of which states the use of Form 3115 is appropriate for a change in the treatment of an asset from nondepreciable to depreciable or vice versa and a change in the depreciation method, period of recovery, or convention of a depreciable asset.

@AmeliesUncle ?