is depreciation of 30.5 years on a residential property under a trust possible?

[2td]

Hi,

My dad set up an irrevocable trust (i am the trustee) and put his house within the trust. The trust is set up to have my parents pay rent to the trust. He passed away in 2021and now my mom pays rent to the trust - which has turned into a simple trust.

I had an accountant do the trust returns for 2020 and 2021 taxes. I wanted to try to do the tax return this year using the TurboTax business edition. To start, I've filled in the info from what the accountant filed in 2020. Everything has lined up except when I toggled the box for "single residential property" it automatically puts 27.5 years as the depreciation rate.

When I look at the depreciation rate the accountant added, I noticed he has it listed as a single residential property with a "life" of 30.5.

I googled it and see that 27.5 is the default for a residential property.

My Questions:

1. Did the accountant make a mistake? (it's also listed on 2021's return)

2. Or is this a "strategy" for trusts? 

3. Is there a way to "override" the area to match what the accountant has (if it's some kind of strategy?)

thanks!!

[Anonymous_ · Accepted solution]

You should absolutely contact the accountant prior to making any change and request clarification.

No one can tell you the accountant's rationale for the recovery period other than the accountant (although it does sound incorrect for a single-family home in this country).

If you do need to change to the standard 27.5-year recovery period, you will have to file Form 3115 and make a 481(a) adjustment and the form is not really suitable for preparation by inexperienced filers. 

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

[2td]

I did contact the accountant and ask if this was an intentional strategy or perhaps something he overlooked.... (without saying that I was wanting to perhaps take on the tax return this year)

he said: "I’ll look into it when I prepare 2022 and make any adjustments necessary. Thanks for bringing this to my attention."

To me, that says: I made a mistake but I won't say it.... 

**I also found a mistake in last year's return - that he forgot to tick the box for my Dad's K-1 as being his "final" return and he misspelled a beneficiaries name and address.

So at this point, I have no idea if it's a definitive error on his part or a method/strategy ....

any thoughts....guidance...suggestions on how to proceed?

😉 thanks!!

[Anonymous_]

The error should be rectified, but you will likely need to get another tax professional to do so.

[2td]

I'd think if he is responsible for an error that he should be responsible for filing the 2 forms to fix the error.... and I should not have to pay for his error! 

[Anonymous_]

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@2td wrote:

I'd think if he is responsible for an error that he should be responsible for filing the 2 forms to fix the error.... and I should not have to pay for his error! 

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I agree. Is the accountant also a CPA or a member of a professional society or organization?

[2td]

Yes - he's a CPA and is part of a firm that has been around for quite some time.

[Anonymous_]

You can continue trying to persuade the accountant to fix your return(s) and/or file a complaint with the state (each state has a board of accountancy, division of certified public accounting, or a similar agency that handles such complaints).

[2td]

good to know... thank you!!