1stoptaxservice
Level 3
12-07-2019
05:27 AM
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no mortgage or property taxes on it. I asked year he purchased property 2011 which he happened to bring all his taxes and noticed that no depreciation was ever taken and the last preparer applied all of the mortgage to the Schedule A long form. I suggested to add the depreciation this year, however question is what to do with all the prior years? Suggestions and tips welcome.
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Just-Lisa-Now-
Level 15
12-07-2019
05:27 AM
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Is it being rented at less than FMV maybe?
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1stoptaxservice
Level 3
12-07-2019
05:27 AM
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It appears yes the rent is fairly low in comparison, they have not raised the rent.
abctax55
Level 15
12-07-2019
05:27 AM
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1) Extension
2) Amend where possible
3) Form 3115
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TaxGuyBill
Level 15
12-07-2019
05:27 AM
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However, DON'T include the depreciation on the amended forms. Just amend to correct any interest deductions. Only use Form 3115 on the current year return for the depreciation.
But as Lisa pointed out, if the rental is truly at less than Fair Rental Value (such as for family or friends), it may have been reported semi-correctly. But if it is just low because the taxpayer doesn't increase rent and the renter is not a friend or family, it still might be considered a for-profit rental on Schedule E.
But as Lisa pointed out, if the rental is truly at less than Fair Rental Value (such as for family or friends), it may have been reported semi-correctly. But if it is just low because the taxpayer doesn't increase rent and the renter is not a friend or family, it still might be considered a for-profit rental on Schedule E.
1stoptaxservice
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12-07-2019
05:27 AM
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They are renting as non family/friend. If I don't amend to include the depreciation, does that mean we lose on the prior years, or we just extend the depreciation years starting now going fwd 27.5 years?
1stoptaxservice
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12-07-2019
05:27 AM
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Thank you all in advance for the comments.
abctax55
Level 15
12-07-2019
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I still say extension...it's too late in the season to figure out this can of worms.. JMHO.
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TaxGuyBill
Level 15
12-07-2019
05:27 AM
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Form 3115 can be used to 'catch up' on all prior depreciation, and it will be on the current year's tax return.
I agree, file an extension.
I agree, file an extension.
1stoptaxservice
Level 3
12-07-2019
05:27 AM
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Awesome info, like always great full to have you all here, Will do the check list 1-3.
abctax55
Level 15
12-07-2019
05:27 AM
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YVW...we are all in this madness together...
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itonewbie
Level 15
12-07-2019
05:27 AM
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With 3115 and the amended returns, I'd want to establish the market rent and rationalize any material difference, just to make sure the story is air-tight that this is a for-profit venture.
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abctax55
Level 15
12-07-2019
05:27 AM
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ah HA....does a 481 adjustment impact QBI ??? . Inquiring minds want to know....
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itonewbie
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12-07-2019
05:27 AM
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§1.199A-3(b)(1)(iii) says it is taken into account, unfortunately. You gain some, you lose some, I guess.
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abctax55
Level 15
12-07-2019
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Tell me you AT LEAST had to look that up :stuck_out_tongue_closed_eyes:
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itonewbie
Level 15
12-07-2019
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I did look that up to be sure and there's no way I can remember the exact citation. Wish my brain is THAT good. :smile:
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robinweaver
Level 3
04-04-2020
05:11 PM
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I'm also needing to claim the 'catch up'. I'm including a 3115 but how do I add that extra catch up depreciation? I can't figure out how to get it on the depreciation sheet.