Form 3115 - Schedule E - Clarity on Question 3

[anxsa]

Hi All,

  My scenario is a bit simple but I want to make sure that I am answering this question correctly. My scenario makes my rental income as passive income only since Real Estate is not my full time job.

  Bought my house in 2019 but put up as rental only in 2021. No depreciation was taken in 2021 and incorrect depreciation(quite less) was in 2022. I am now submitting 3115 (using DCN# 7) and I am doing the proper calculations in Form 3115, Part IV, Section 481(a) adjustment to add the missing depreciation from FY 2021, but also deduct the incorrect depreciation taken in FY 2022, to ensure the net result is right.

However I need clarification on Question 3 of Schedule E on form 3115:

Has a depreciation, amortization, expense, or disposition election been made for the property, such as the election under sections 168(f)(1), 168(i)(4), 179, 179C, or Regulations section 1.168(i)-8(d)? . . . .                           _Yes_      _No_

If “Yes,” state the election made _________________________________

Since I have taken some depreciation in FY 2022, should I mark it as Yes?  If, "YES", then what election should be mentioned (I read the documentation and since I have a simple scenario of passive income, I am thinking it could be 1.168(i)-4 but would love your expert feedback).

Thanks for your help!

[anxsa]

Tagging  @AmyC  and @DianeW777  to see if you can help just like the other thread.

Appreciate your guidance thus far.

[DianeW777 · Accepted solution]

These are the following choices, noted.  Please choose the one that best represents your situation.

• Code § 168 - Accelerated cost recovery system (most common)
  • Code § 1.168(i)-4 - Changes in use
  • Code § 1.168(i)-8 Dispositions of MACRS property
• Code § 179 - Election to expense certain depreciable business assets 
• Code § 179C - Election to expense certain refineries

@anxsa