Forms 3115 & Depreciation

[luckey22330]

@AmeliesUncle 
Sorry, yes, 39 years, thanks for the correction.

I do not have long term tenants, it is an STR.  It is occupied for less than seven days each week and I materially participate in the operations, so I qualify to leverage Schedule C versus Schedule E.

[Critter-3]

Business use properties are 39 years on a Sch C  even if it would be a 27.5 year property on a Sch E and the program is handling it correctly.  

[AmeliesUncle]

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@luckey22330 wrote:

@AmeliesUncle 
Sorry, yes, 39 years, thanks for the correction.

I do not have long term tenants, it is an STR.  It is occupied for less than seven days each week and I materially participate in the operations, so I qualify to leverage Schedule C versus Schedule E.

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Unless you provide "services" to the tenants, it still belongs on Schedule E.  It does not belong on Schedule C.

TurboTax does not ask the proper questions for a short-term rental with Material Participation.  You will need to use the CD/downloaded version to get it to work correctly.  After entering all of the correct information as a rental on Schedule E, you'll need to go to the "Forms" in the upper right-hand corner.  The on the left side, select "Schedule E Wks" and then check box "G" (other passive exceptions).

[AmeliesUncle]

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@luckey22330 wrote:

Sorry, yes, 39 years, thanks for the correction.

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Oh, one more thing.  When entering this in the rental section, I think you'll need to tell TurboTax that it is a commercial property (not a residential rental) in order to get it to properly depreciate it over 39 years.

[dishes_spoons]

Hi Amy! So I have special depreciation across 2 different cost segregations, and going to file the form 3115 and the new deprecation schedule.

Are you sure it's ok just to enter it here into Miscellaneous? Don't I somehow have to change the asset itself, and maybe show that I am changing the amount?

[AmyC]

You do make an adjustment on Form 3115 showing the changes.  The numbers involved dictate next steps. If the adjustment is under $50,000, you can report the positive adjustment in a single year. Otherwise, you must report the adjustment over a 4 year period. It does get complicated so here is another post of mine with the adjustment showing. The 3115 also requires statements, so you will need to add that to your return. A word document works well.

@dishes_spoons 

[stevef4571]

This is a good guide on what needs to be done from a forms perspective, though figuring out exactly how to do it in turbotax still will take some work.

https://www.wealthyaccountant.com/2021/09/20/form-3115-cost-segregation-study/

Well, if cost seg is done on the firs year, seems we just skip the 3115 and enter the various categories of depreciated property (like in the example above that says "The new depreciation schedule will look like this"), then use Bonus depreciation (80% for 2023) to immediately accelerate 80% of the depreciation for everything under 20 years recovery period.

For a property put into service in an older year:
- I have seen some accountants claiming that failing to claim bonus depreciation can be corrected by filing form 3115.  So it seems to me that 3115 can be used but to split the depreciation classes and also to correct the failure to claim bonus depreciation in the first year of service.