Investors & landlords

If you lowered the cost basis, that would reduce your loss on sale which would have a negative affect on your taxable income. You didn't say how the cost of the property was determined, so I can't comment on whether you entered the correct cost or not.

You can depreciate furniture and fixtures used in a rental activity.

You can file form 3115 to report depreciation missed in previous years as one lump sum on your current year tax return. You will have to calculate what the missed depreciation was to make the adjustment though.

Here is how you do the entries for form 3115 in the desktop version of TurboTax:

Attach form 3115 to the tax return for the year of the change, along with a statement describing the property subject to the change. Include the year the property was placed in service and the property’s use in the applicant’s trade, business or income-producing activity.

Review questions 5 – 7 for additional disclosure requirements.  Mail a copy of form 3115 and the disclosure statement to the address in the instructions to form 3115.

You enter the adjustment referenced as section 481(a) depreciation adjustment in the “Other Expense” section on your schedule E, page 1 or on form 8825 if for a partnership or S corporation rental activity.

Here's a link to the IRS information on form 3115:

https://www.irs.gov/forms-pubs/about-form-3115