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I have seen a situation where the difference is material, where a 3115 was filed to correct the Cost Basis, and to calculate the depreciation which should have been taken.
The Depreciation difference (Under or Over reported...sounds like under in this case) was then reported as an expense in the year of the correction as a current expense. (in the case I saw, it was the year before the sale).,
The Sale was then reported as if everything had been done correctly from the start. I have no experience as to the final outcome, as this was a recent filing.
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I have seen a situation where the difference is material, where a 3115 was filed to correct the Cost Basis, and to calculate the depreciation which should have been taken.
The Depreciation difference (Under or Over reported...sounds like under in this case) was then reported as an expense in the year of the correction as a current expense. (in the case I saw, it was the year before the sale).,
The Sale was then reported as if everything had been done correctly from the start. I have no experience as to the final outcome, as this was a recent filing.
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Thank you!
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Could the cost basis difference be an allocation for the land ?
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- Verify that the Basis is wrong, including determining if "land" part part of the wrongness.
- Enter the correct Basis on the tax return you are preparing.
- For the "prior depreciation", enter the larger of (a) the amount of depreciation actually claimed or (b) the amount of depreciation that SHOULD have been claimed.
- Determine if amending prior years is worthwhile.
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And a 3115 also?
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@dianejhart wrote:
And a 3115 also?
If it was strictly using an incorrect Basis, no, form 3115 does not come into play.
If it was something like land being depreciated, not depreciating improvements, or some other incorrect method, that is when Form 3115 applies.