Author Topic: Fixing a mess with a sold rental property and determining depreciation  (Read 1708 times)

dadof4

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So it looks like I made a mess over the years...

I bought a house in 2007, lived in it for a couple of years, then converted it to a rental property.
I recently sold it, and netted about what I bought it for.

Now comes the messy part -
Looking at my tax returns for the last 6 years, it looks like I claimed a different amount of depreciation almost every year. I did my own taxes, and switched tax software a few times, each with their own algorithms...
For some years, the base was the value of the structure for a given year (per tax records), for other years it was the original buy price.

So what rate should I use when determining my depreciation for the sale? Can I just add all of the deprecation I claimed over the years? Should I choose a rate and try to amend past returns?
What is the cost basis of the property? (I'm assuming I can use the price I bought it for).

Drifterrider

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Re: Fixing a mess with a sold rental property and determining depreciation
« Reply #1 on: January 29, 2017, 04:55:19 PM »
This is one of the few times I'd recommend you meet with a good CPA.  You will have depreciation recapture issues, and perhaps cost basis issues.


CareCPA

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Re: Fixing a mess with a sold rental property and determining depreciation
« Reply #2 on: January 29, 2017, 06:50:16 PM »
Depending on how the numbers are, it might be worth amending to fix (you can only amend the last three years). You will need to sit down and figure your basis and depreciation allowed or allowable to calculate the gain anyway. Your basis will be cost plus any capital improvement.

BlueLesPaul

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Re: Fixing a mess with a sold rental property and determining depreciation
« Reply #3 on: January 31, 2017, 10:36:22 AM »
This is one of the few times I'd recommend you meet with a good CPA.  You will have depreciation recapture issues, and perhaps cost basis issues.

I concur with Drifterrider on this one.  If you reported a different amount of depreciation for certain years, best case is that you could amend some return(s), worst case is that you will have to file form 3115 and/or do depreciation recapture.  If you look at the 3115 instructions, the IRS estimates an insane amount of time to prepare this form.

Form                     Recordkeeping             Learning about the law                         Preparing and sending
                                                                 or the form                                           the form to the IRS


3115                     38 hr.,  29 min.            19 hr., 54 min.                                    23 hr., 48 min.
Sch. A                  3 hr., 21 min.               1 hr., 51 min.                                      3 hr., 11 min.
Sch. B                   1 hr., 25 min.              30 min.                                                33 min.
Sch. C                   5 hr., 1 min.                45 min.                                               2 hr., 4 min.
Sch. D                  27 hr., 30 min.             1 hr., 59 min.                                     2 hr., 31 min.
Sch. E                  3 hr., 49 min.               1 hr., 59 min.                                      2 hr., 8 min.

This link to Publication 946 should give you more information.  https://www.irs.gov/publications/p946/ch01.html#en_US_2013_publink1000107384

cchrissyy

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Re: Fixing a mess with a sold rental property and determining depreciation
« Reply #4 on: January 31, 2017, 11:59:36 AM »
yikes! agree you should get professional help to clean up the mess

 

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