To correct an error in the basis of rental property, you must amend the returns.
Form 3115, doesn't "pay back" depreciation, it "gives" you the depreciation expense when you haven't taken any during the rental period.
Explained:
If you filed Schedule E, claiming your rental income and expenses, and you depreciated any of the rental property, you should have Form 4562, Depreciation and Amortization Report in your tax return copies. Form 4562 (not filed with returns) will show the cost/value/basis of the property and the non-depreciable land. If the cost basis is wrong, then you would amend the prior year returns to show the correct basis, which would offset your rental real estate income for each year of rental, frequently resulting in a refund. (Generally, you must file an amended return within 3 years after the date you filed your original return or within 2 years after you paid the tax, whichever is later.) In the year of the sale, you use the (corrected) totals for basis and prior depreciation when entering the amounts in TurboTax.
If you filed Schedule E, but you never took depreciation, then you would file Form 3115, Application for a change in Accounting Method, with your tax return. (You are changing from an impermissible method of accounting for depreciation to the permissible method, Code 7.) The effect of the Form 3115 would be to add the entire amount of overlooked depreciation (in full) in the year of correction. The total depreciation adjustment is called a Section 481(a) adjustment. When sold, you are reducing your (corrected) basis by the depreciation you take on Schedule E (when you file Form 3115) in the year of the sale.
See this article for a more in depth explanation of when to amend and when to adopt a change in accounting method: What if I didn't take depreciation on my rental property?
See this article for getting your rental property's basis correct: Major improvements before rental property put into service and basis There is also information in the article about short term rentals.
