I sold a rental property last year and in the process of working on my taxes, I've realized that I forgot to enter a major land improvement I made a few years back as an asset when I first made it. :( It looks like I can easily add it to my TurboTax information this year and it accounts for the missed depreciation and all that. The issue is that since I sold this house last year, I need to be able to say I disposed of the asset too but it looks like there's no way to do that with an asset that I just created. Is there a workaround for this? One thought I had was to just enter the improvements as an expense for this year but that's not quite technically correct and it's a pretty big chunk of $ for an expense.
No, you can't add the land improvement rental asset to your 2021 income tax return. You'll have to amend your 2020 income tax return since it's part of the rental sale.
Please see How to amend (change or correct) a return you've already and Form 3115 - Application for change in Accounting Method to enter the depreciation not taken.
OK, so amend the 2020 return to add the asset and then mark it as sold in 2021 (that's the year I sold the property)?
Yes, but be sure to reference the links @HelenC12 provided to be sure you complete all the necessary steps so you don't have any deductible depreciation denied by the IRS.
@dsaxena_pdx