Rental Property Depreciation - Correcting cost basis and depreciation for 6 years

Forum|Forum|4 years ago
January 9, 2022
16 replies
27 views

I have discovered that the original cost basis for the condo apartment was entered incorrectly in 2014. The tax preparer did not include mortgage, which made the cost $120K instead of $380K. It there a way to correct it for the past years and going forward?

Thanks in advance

Mike9241

Level 15

are your numbers correct? a mortgage should not reduce the cost basis.

look at the closing statement- the purchase price on line 1 + applicable closing costs is your tax basis. a mortgage simply reduces the cash needed to buy the property but does not affect the basis.

Mike9241

StatenIslandAuthor

Level 2

Unfortunately my numbers are correct. Looks like the pax preparer did not pay attention while doing the 2014 taxes. I have never reviewed since that, so the original cost basis and depreciation has been propagated to all the tax returns including 2020. Now I am doing 2021 with turbotax and this number looked suspicious.

Is there a way to correct it for the previous years and going forward?

Thank you

Mike9241

Level 15

i can't see the closing statement. but I see no way a mortgage would reduce tax basis.

do you have the closing statement? what is on line 1 for the purchase/sales price? $120K or less (because closing costs would add to basis) or $380K or less - same reason.

if $120K is correct see a tax pro. you'll need to file form 3115 to change the depreciation and in addition you will owe taxes on the excess depreciation taken

Mike9241