I am trying to enter a rental property contributed by the LLC members in equal proportion that has been depreciated for 20 years. In TurboTax business, I have to enter an acquisition date for the property, but if I use that date and the adjusted carryover basis as of that date, the annual depreciation amount is incorrect because TT thinks its a new asset for the full 39 years rather than the remaining life of the transferred asset which should be 19 years.
Is it possible to enter the original date of acquisition and original acquisition amount, so the depreciation amount is correct and depreciated for the correct remaining life? How is that done?
You can enter Forms Mode and input your dates and figures directly on the Federal Asset Entry Worksheet (see screenshot).
Note, however, that you will be entering the prior accumulated depreciation and the current deduction will change accordingly (i.e., you need to enter an accurate figure).
I am assuming you own the property *AND* that you are a member of this multi-member LLC that was established in 2019.
The start date of the multi-member LLC ***MUST*** be the same date that the rental property was originally placed in service, or a date before that date. It ***MUST***, or you'll be audited. Doesn't matter if it was years ago either.
The fact is, the "rental business" started years ago when that rental was first placed "in service". Then "the business" became a multi-member LLC. So "the business" started long before it became a multi-member LLC, even if years before. Therefore the start date of "the business" on the form 1065 ***MUST*** be the date that rental property was placed in service, or before that date.
The only legal way around this is if you actually sell via a formal mortgage loan, the rental property to the LLC. But with you being a member of that LLC, the tax reporting on the sale will be an absolute nightmare.
If you sell it to the LLC, then you as the seller are required to recapture all prior depreciation on the property and pay taxes on it in the year of sale. Then for the LLC it would be newly acquired property and depreciation would start all over from year one.
Yes, the property was inherited by my two other siblings and myself. The rental property was placed in service decades ago, and contributed by the siblings to the LLC in March 2019. For the period in 2019 prior to the March transfer date, it was owned by each sibling as TIC, so for TT home and business I converted the property to personal use as of the calendar day before the March transfer date.
In Tubotax business, I did not see where you enter the start date for the property vs. the LLC.
I used the same date for both the start of business for the multi-member LLC and the date the contributed property was placed into service. It was the date the deed was recorded in the name of the LLC. The LLC has no other asset of any significance.
One problem with going into Forms is that once I corrected the placed in service date, the calculation of depreciation is for the whole year rather from the March business start date of the LLC. Do I need to also adjust the depreciation for the partial period in 2019 for the LLC?
I believe you can actually just use the figure calculated by TurboTax in Step-by-Step if you are using the March 2019 date for placed-in-service (i.e., the calculated figure should be accurate for the 2019 tax year but you may, probably will, have to adjust the accumulated (prior) depreciation figure).
Yes. Thanks tagteam. There is some tweaking of the prior depreciation numbers to get them right. I know from prior years the exact depreciation amount for the entire year, and getting TurboTax Home and Business and Turbo Tax Business to come up with the same number for the entire year composed of partial years is a pain, especially when 50% was inherited from one parent about 20 yrs ago and the other 50% 3 years ago requiring two different asset entries with different depreciation schedules. Thanks again.
Final post on this. TurboTax Business needs for business asset additions to include a method to enter contributed assets to a partnership or LLC that allows carryover basis information with a caveat that in certain cases the addition may have additional tax consequences to the owners that are not handed by TT businessand professional tax advice sought.
The final result of this exercise is that you can't enter a carryover basis asset contributed to the LLC and have TT business calculate the either the correct depreciation amount or accept a forced accumulated depreciation amount. Until fixed, you have to pick one or the other, and the best is to have the correct current depreciation amount and have a spreadsheet to account for the accumulated depreciation and remaining life.
The prior depreciation can't be adjusted in the forms or available to adjust in the step by step. You can try to adjust it but is highlighted in red, and if you try to force the in service date in forms to its carryover in service date prior to 2019, it thinks the asset was in service for the entire year as of January 1, 2019 and calculates a whole year. I tried multiple iterations of possibilities.
Needs a software fix.
@kwanfam1 True, this an issue and, frankly, not the only issue I have encountered over the years, and not only in the 1065 module of the software. The fact is the various modules appear to be programmed for the most basic and common combinations, permutations, and scenarios. When anything occurs that strays beyond the programming, an issue, such as this one, presents itself.