I discovered that for 6 yrs I reported a 2nd home as rental property when it should have been personal property. Can I fix this by amending 6 yrs worth of returns?

[jerifeaster]

For 6 years I have been reporting a below-FMV-rental to my mother as a rental property. I have claimed all valid expenses and depreciated the property, and still claimed a modest profit using the FMV as income rather than the much lower actual income. So, I have paid taxes on a profit that never actually existed, and generated about $50K of depreciation that I will be taxed on when it is recaptured one day. This has always seemed wrong to me. I have since learned that renting to your parent at below FMV is actually considered personal use of the property, with no income or deductions, other than those allowed on Schedule A for a second home. I would like to undo this mistake by amending all the prior returns so that there is no depreciation to recapture later. Is this possible?  

[jtax · Accepted solution]

You should seek the advice of a CPA, enrolled agent, or tax attorney. You should do this ASAP because there are time limits (statutes of limitations) involved and April 15th might be one, depending upon when your returns were filed.

You can only request a refund for three years from the time the return was filed.See 26 U.S. Code § 6511 - Limitations on credit or refund | U.S. Code | US Law | LII / Legal Information...

Beyond that time you may not get any money back. However, in some circumstances you can still file an amended return in order to properly compute taxes within the three year period that depend upon things like carryforwards. Perhaps that could be used to reduce some depreciation. Perhaps not. This is very complicated and requires legal analysis.

[jerifeaster]

Yes I agree. Sadly, I had an appointment with a CPA to review this, but she has moved my appointment until after tax day due to being overloaded. So, I will miss the deadline for getting a refund for at least one of the years. I considered signing up for Turbotax Live but I don't know if this is too complex for that service.