Adjusted Basis missed in prior years, can I do Form3115 in year of sale?

cmc7 · ‎09-22-2023

I have a new client who sold his rental property in 2022 but after discussing his gain, he said the improvements he made on the property (it used to be his primary home) before it was placed in service as a rental was not included in the home's basis since 2006. I've read on a few places that you can't use Form 3115 for missed basis but wanted to see if anyone has any definitive information on that.

Thank you!

sjrcpa · ‎09-22-2023

At the time it was converted to rental, the basis for depreciation was the lower of cost (+ improvements) or FMV at that time.

Could that be a factor?

Ex-AllStar

cmc7 · ‎09-22-2023

No, unfortunately cost w/improvements is still lower than FMV at that time.

Terry53029 · ‎09-23-2023

in answer to your question you can't use 3115 to adjust basis. here is a link. https://www.irs.gov/instructions/i3115.

I believe using an incorrect basis is considered a mathematical error, and you can amend three years, but no 3115.