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If there is a material amount of land included in a rental building depreciable basis, should you use 3115 to correct the error?

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Level 2
 
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Level 12

In my opinion, it is a gray area.  You can probably do whichever way works out best.   🙂

If you consider it as that you are depreciating the land, file Form 3115.

If you consider it as you are NOT depreciating the land but are just using an incorrect Basis for the building, then don't file Form 3115 and any corrections can only be done on amended returns.

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Level 15

Yes.

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Still an AllStar
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Level 2

I was definitely thinking this was a yes but then I looked at the instructions for the 481 adjustments for the DCN code 7 changes, and I wondered if this was treated more as an adjustment to depreciable basis which should be corrected going forward.

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Level 12

In my opinion, it is a gray area.  You can probably do whichever way works out best.   🙂

If you consider it as that you are depreciating the land, file Form 3115.

If you consider it as you are NOT depreciating the land but are just using an incorrect Basis for the building, then don't file Form 3115 and any corrections can only be done on amended returns.

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Level 2

Thank you so much for you input!  I appreciate it!

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Level 11

From 1996 to 2011, roughly 20 square miles of dry land and wetland were converted to open water along the Atlantic coast.  (By comparison, Manhattan is 33 square miles.)  Did someone tell those people that they couldn't depreciate land?  And then there are the flooded areas along the Mississippi and other Midwestern rivers, that may be underwater forever.  And that dam that burst in Michigan.  Not to mention the earthquakes and landslides in California.  Who hasn't heard jokes about seafront property along the Colorado River, after the next Big One?  These are the known risks to losing land.  But then there are the unknowns.  What if it turns out the next coronavirus comes from a snail that is found within 25 miles from Poughkeepsie?  How much do you think that land is going to be worth?  I say, let's depreciate all of it, not just the Florida resorts.  

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Level 8

Slightly off topic but having had the incredible joy of filing a Form 3115 last year, I cannot say how strongly I feel about doing the Form 3115 Self Study course at brasstax.com. It is a whopping $45 and worth every penny as it may save your sanity.