Form 3115

[marissar]

I have a bit of a weird situation and I'm not sure if I can claim the depreciation in the current year or not. My parents have some rentals and when they first started renting they had an accountant doing their tax returns. One year of depreciation was taken on one rental and three years was taken on a rental sold in 2021 through the accountant. My mom wanted to save money and switched to do her own taxes. The program did not ask her about depreciable assets or anything like that so no depreciation has been claimed since 2017. Am I allowed to claim the depreciation for 2018-2021 and file a 3115 for 2021 or is she out of luck because it depreciation had been taken previously?

[Mike9241]

 a 3115 is required for the omitted depreciation. unless you are sure you can complete it correctly, use a pro. there is more involved here than just the omitted depreciation. there are passive loss considerations. possibly a net operating loss which has its own quirks (must be carried back unless the election is made to carry forward and finally the 199A/Qualified Business Income reporting which started in 2018. 

[Carl]

My mom wanted to save money and switched to do her own taxes. The program did not ask her about depreciable assets or anything like that so no depreciation has been claimed since 2017

What program did your mom use? I ask, because some tax programs (including turbotax) will figure depreciation "in the background" and not bother the user with the details. So how do you know for a provable fact, that depreciation was or was not taken?  I see posts like yours several times each year, and sometimes it turns out depreciation was taken, and the tax filer did not even realize it.

[tagteam]

---

@Carl wrote:

....So how do you know for a provable fact, that depreciation was or was not taken?  

---

If the rentals were never added as assets, then it is almost a certainty that depreciation was not deducted.

If a TurboTax user does not know to add a depreciable asset, the program will not prompt the user for it.

[AmeliesUncle]

---

@marissar wrote:

I'm not sure if I can claim the depreciation in the current year or not.

One year of depreciation was taken on one rental and three years was taken on a rental sold in 2021

---

Yes, you can claim depreciation in the current year.  When it asks for "prior depreciation", be sure to enter the amount that SHOULD have been taken.

As for the prior years, because depreciation was taken in the first year it was rented, Form 3115 does not apply.  She can amend the prior years to claim the depreciation for those prior years.  The older years may be past the Statute of Limitations for a refund; however, if she had passive losses that were not allowed then amending would increase her carryover passive losses.

[marissar]

She used TurboTax and there is no depreciation for the houses on the Sch. E. 

[tagteam]

---

@marissar wrote:

She used TurboTax and there is no depreciation for the houses on the Sch. E. 

---

Then, as @AmeliesUncle wrote, the returns should be amended for the years no depreciation was deducted.

[nanosuna1977]

I already input all the info for my 2021 taxes using the online version but asked for an extension(I haven't printed north submitted my 2021 taxes yet).  I need to submit form 3115 for a few of my properties in order to take cost segregation deductions for those properties. After I download the desktop version, can I transfer the info I already input in the online version of turbotax for 2021?  Also, does the desktop version allow you to take the special deductions for such properties in 2021 once you change the accounting method for the properties in question?  Thank you!

[Mike9241]

what you would probably need to do is upload the .taxfile2021 file. to the desktop. then use overrides to get the depreciation and 481 adjustment right. you may end up with a mess on your hands. there will be no accuracy guarantee due to overrides and you'll have to mail your return so do not expect to hear anything about it for 6 to 9 months (or more since this may require special manual processing). you would probably need to delete the original property. and then enter each component as a separate asset. Turbo tax doesn't really have the means to enter the asset's depreciation history so future years may also present an issue. 

see what other post. 

[VolvoGirl]

@nanosuna1977  Yes.  

You can move your Online file to the Desktop program and continue without paying for Online or needing to reenter your info.  If you already paid for the Online version you can ask them for the Desktop program.

To continue in the desktop version see this…….

https://ttlc.intuit.com/community/choosing-a-product/help/how-do-i-switch-from-turbotax-online-to-th...

Download the .tax2021 file for free

How do I save my TurboTax Online return as a tax data file?

After you get the program installed the first thing to do before you open your tax return .tax file is to update the program and install any state programs you had. Then open your file. So you first might need to start a fake return to be able to download the state program (go to FILE - NEW).

[nanosuna1977]

Thank you for your help.  I have a couple of questions though.  I am not clear what you meant by "After you get the program installed the first thing to do before you open your tax return .tax file is to update the program and install any state programs you had."

What do you mean by state programs?  im sorry im not familiar with that term.

Also "Then open your file. So you first might need to start a fake return to be able to download the state program (go to FILE - NEW)."

Can you elaborate that this step means?  Does this mean download like in my case software for the state in the US i live in (e.g Texas)?

One last question.  In my original question I was wondering if I could take the the full depreciation from a cost segretation study (in 2021) done on properties I acquired in 2015 and 2019.   How dificult is to do this in turbotax and to generate these 3115 forms?  thanks again

[tagteam]

---

@nanosuna1977 wrote:

Does this mean download like in my case software for the state in the US i live in (e.g Texas)?

---

Disregard the state download since Texas does not levy a state income tax. No need to download a state return.

[tagteam]

---

@nanosuna1977 wrote:

How dificult is to do this in turbotax and to generate these 3115 forms? 

---

See https://www.irs.gov/instructions/i3115#idm140516453720416

Note that e-file is not supported with respect to Form 3115 in TurboTax (print and mail only).

Further, you will have to prepare the form using Forms Mode (i.e., enter figures directly on the form itself).

[Mike9241]

since you live in Texas if all the properties are located there, no state return is required because Texas does not have a personal income tax.  if you are not the sole owner (have partners) then your situation changes. it would be the partnership(s)  that would need to change their accounting.

based on the questions you're asking you may be better off using a tax pro. 

also if you are not a real estate professional, the additional deductions might not produce any immediate tax savings because of the passive loss rules. and if you are the 481 adjustment and the additional depreciation for the current year might  create an NOL. 

[nanosuna1977]

When I try to download my tax return file I keep getting a FAIL:  NETWORK ERROR.  Anyone experienced this?  thanks