Prior Depreciation

[kittieshere]

I have a new client that has a rental property since 2014. The property was depreciated properly prior to becoming my client. I am working on the 2021 Return and entered the asset as I usually do - entering the value of the property, the land, the length of time (30 years/commercial property). Up to this point it works fine and calculates the depreciation matching prior Returns. The problem starts when I enter prior depreciation, suddenly the depreciation changes for this year. I need to be able to have it properly calculating, because the building was "exchanged" (Section 1031). I have not even started on the1031 Exchange since the prior depreciation is giving me an issue. What am I overlooking or entering wrong?

[IRonMaN]

It sounds like the software doesn't agree that the past depreciation was calculated correctly based on what was entered into the system.  Do you have the same month and year loaded in for the placed in service date as the prior depreciation schedules?

[kittieshere]

Yes, I have the correct date. I looked at the Asset Life History when I enter it without the prior depreciation and it shows the same amounts.

[IRonMaN]

How much is the difference?

As a side note, if you feel the current year amount is not correct, you can always override the current year to what you believe is the correct amount,

[kittieshere]

It changes the depreciation from $28,299 to $29,173.

According to Asset Life History/Prior Returns the first year was $17,687, year 2-39 should be $28,299 and the last year $10,612

[TaxGuyBill · Accepted solution]

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@kittieshere wrote:

the length of time (30 years/commercial property).

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Do you mean 39 years?

Have you manually calculated the prior depreciation, and if so, does it match what the prior depreciation schedule shows?

I suspect that the "prior depreciation" that you are entering is probably wrong.  You can just leave it blank if you want to.  Another option is to scroll WAY down on the Asset Entry Worksheet and say "Yes" to using the IRS "Tables".

[TaxGuyBill]

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@kittieshere wrote:

the first year was $17,687, year 2-39 should be $28,299

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Are you entering $187,481 for the "prior depreciation"?

[kittieshere]

Yes, the 30 was supposed to say 39.

Yes, prior Returns and by-hand match and ProSeries calculation is showing the same.

Your idea with the IRS Tables worked. 

[kittieshere]

Yes, I entered $187,481. I tried minus $159,182 and $215,780, just to see what it would do, but it always did the same thing.

I think the idea about marking the IRS Tables and using the $187,481 as prior depreciation is the way to go.

[TaxGuyBill]

Just to confirm, your depreciable Basis (after land is subtracted) is $1,103,661?  And it is using 39 years, rather than ADS depreciation (such as if it was outside of the US, or the elected 40 years)?

If so, that is really weird why the program is doing that.