This is not something you can just continue with as if not taking depreciation is not a big deal. Yes, you are going to have to pay a lot of money on any gain and the depreciation recapture. Part of the problem is that your depreciation should have been based on the lower of the FMV or the adjusted basis on the date you placed it in service. You need to correct this and the only way to do it is to file a Form 3115. Since you are forced to recapture the depreciation you never took, you need a way to also claim it.
Tuesday, January 18, 2022
12:16 PM
Unfortunately the depreciation recapture is "allowed or allowable" meaning even if you never depreciated it, you would still have to recapture the depreciation. Depreciation taken would be on line 18 of Schedule E.
One solution is to elect an accounting method change and file a Form 3115 in the current year and take the prior depreciation as a section 481(a) adjustment. [land value is separated, land is not depreciated]
Below are the IRS links related to the change in accounting method. TurboTax does not have that form.
May be these will help
Form 3115, Application for Change in Accounting Method
Change-in-Accounting-Method
Instructions for Form 3115 (03/2012)
Instructions
Form 3115,
Form 3115
