Yes, you can do that if it represents an accurate land value. The next question would be if there was any 'buy up' in the original Section 1031 trade and whether you actually did depreciate the additional 'buy up' as a new asset.
Again, if the land value does represent an appropriate amount and it would coincide with the tax assessment on this property received you can use your action plan.
If not, then you should use the 3115 as indicated by Mike9241, because the IRS tax law is clear. Depreciation is allowed or allowable which means use it or lose it and at the time of sale, you will pay tax on the amount that would have been allowed for depreciation that was never used. Form 3115 eliminates that problem by allowing you to claim all unused depreciation in the current year.
You can use the following form to correct the depreciation for your rental property, take any amount not previously expensed on a prior return, as an expense on the current year tax return as 'Other Expenses'.
Form 3115 Instruction: By including this with the current year tax return, you can complete everything on the 2023 tax return.
- Adopt a change in accounting method: This option allows you to go back as far as you need. Make the adjustment on your current year tax return to expense the missing depreciation.
- Why am I adopting a change in accounting method? Not claiming depreciation in two or more years indicates that you've chosen an accounting method without depreciation. In this case, you must now elect to change your accounting method to include depreciation.
- You must use the TurboTax CD/Download version to complete this form. TurboTax does not help you with this form. And your return must be mailed because this form is not supported through e-file.
This must be completed and filed with the 2023 return on time.
You can change to TurboTax CD/Download if you choose.
@sk-109
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