Semi- final answer: This is an 80% fix for the issue of a partner contributing an asset to the partnership with accumulated depreciation (for an initial partnership return, but should also work on assets contributed to a partnership that has been in existence for a few years). It was arrived at with some help from TT phone support. For this example, assume the partnership started up on 1/15/2015.
1) Printout your last “Depreciation and Amortization Report” for the entity the accumulated depreciation occurred in for your use in step 3.
2) Go to Forms and open the “Information Worksheet” form. In Part 1 it will show a “Date Business Started” of 1/15/2015. Look down the “Date Placed in Service” column in the old Depr. Report and pick the earliest “Date of Service” of any asset you want to add, say it is 6/12/2002. Click on the 1/15/2015 “Date Business Starte”d in the current return form and change it to “6/12/2002”.
3) Change to the “Step-by-Step” mode. Go to the tab Federal Taxes/Deductions/Rental Real Estate Expenses. (If you have a different type business, the equivalent first section). Click on Assets (Start or Update). Enter in each of the assets from the old Depreciation Report, with the true Date in Service date, cost, etc. just as if it were a new asset you purchased. At the end, it will give you a summary saying something like “You qualified for $3,545 is past depreciation, is this correct?” Make any adjustments to get the old depreciation schedule match this entry, asset by asset. (What you are doing is faking out TT to make it think that the business was started up 15 years ago and you just started using TT for the first time and entering in the past assets).
4) Once all assets are entered, go back to the “Information Worksheet”, and reset the “Date Business Started” date to 1/15/2015.
5) Then check the new depreciation schedule and all of the accumulated depreciation is in, along with the special depreciation.
Residual issue: If you look at the balance sheet, it will be off, because it will show the assets as “Beginning of Tax Year” assets, even though the business did not exist. It also makes an issue with the year-end Partner’s Capital Account, at least for me (at this point in my data entry). Two possible workarounds: 1) if your year-end assets are less than $1,000,000, put your head in the sand and choose the option in the Step-by-Step mode to not fill see the balance sheet, and related M forms. With this choice, your financial sheets won’t match your books, but TT hides that from the IRS ; or 2) Look at the balance sheet, and hide it like the above for the initial tax year, but make corrections in year 2. (I think this will work, I will know next year). But maybe there is a fix for the double asset booking (comes in as a $ amount to the partner’s capital account, plus the residual asset value after depreciation taken).
