@michash2998 wrote:
- tax year 2018, entered purchase price of $385k as cost and started depreciation of just the property portion without land
- tax year 2018, entered closing cost of $12k as an additional asset and started depreciation
- tax year 2019, brought new water heater of $900 as an additional asset and started depreciation
Based solely upon the three statements in the quoted section above, I cannot see an issue that would involve Form 3115. The cost of each asset was, apparently, entered and reported on the tax returns in the years in which they were placed in service and depreciation was deducted.
The only readily apparent issue seems to be that the closing costs were lumped together, listed as an asset, and depreciated separately from the structure rather than having been added to the cost basis of the structure. Perhaps a portion of those costs should have been allocated to the land, but that would be a separate issue.
Regardless, recapture and capital gain should be relatively accurate after the sale provided the correct portion of the sales price is allocated to each asset.
