topic Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ? in Get your taxes done using TurboTax

Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Tue, 24 Feb 2026 07:05:20 GMT

In 2010, I bought a rental property with a friend with each of us having 50% ownership.

In 2019, I bought over this 50% from my friend, making me 100% owner of this property.

For 2019 I added this newly acquired 50% into the property depreciation report.

From 2010 to 2018, the original property depreciation is reported at 50%.

In 2011, we performed remodelling and depreciation report is at 50%.

How should I handle this from 2019 onwards ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Mike9241 — Fri, 25 Aug 2023 16:43:32 GMT

for your original 50% you should have been taking 100% of yearly depreciation using only your cost not 50% on 100% of cost (my opinion)- i'll skip on whether you should have been filing partnership returns for the years your friend had his interest.

you now create a second asset for what you paid your friend and start depreciation with the purchase date in 2019

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for the 2011 remodeling you should have only included 50% of the cost and taken 100% of the yearly depreciation

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when you bought your friends interest you also bought the improvements so there is no separate asset for this

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Fri, 25 Aug 2023 16:56:14 GMT

I agree with Mike9241 but believe you can get around filing a partnership return by virtue of Section 301.7701-1(a)(2).

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 14:51:36 GMT

Thanks @Mike9241 and @Anonymous_ . After I amended my 2019 with this new asset, how do I proceed with 2020, 2021 and 2022 ?

Start with amended 2020, 2021, 2022 returns or add new asset to 2020, 2021, 2022 just like what I did for 2019 ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 15:06:33 GMT

When you do not take depreciation deductions for two or more consecutive tax years, you are considered to have used an impermissible method of accounting.

As a result, you need to file Form 3115 (not amended returns) and make an adjustment for the foregone depreciation.

See https://www.irs.gov/instructions/i3115#en_US_202212_publink100035791

You will most likely need assistance with this form. It is included in TurboTax but must be prepared in Forms Mode (only available in desktop editions of TurboTax) and is somewhat complex.

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 15:21:54 GMT

Meaning I have to file Form 3115 for 2019, 2020, 2021, 2022 ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 15:29:30 GMT

No, you only file the form once, with your current return (1040).

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 15:35:25 GMT

@Anonymous_ Little confused... So I continue to file amended returns for 2019 to 2022

and for 2023, file Form 3115 ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 15:43:55 GMT

No, if you only need to make adjustments on those previous returns for foregone depreciation, you do not need to file amended returns for those years.

Rather, you would file Form 3115 with your current year's return (1040) and make a 481(a) adjustment (once) for the total foregone depreciation (i.e., it's a one-time adjustment).

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 19:16:12 GMT

Thanks @Anonymous_ !

How do I handle the CA state returns for 2019 - 2022 ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 20:12:16 GMT

@amyonghwee wrote:
How do I handle the CA state returns for 2019 - 2022 ?

Frankly, I'm not sure, but I did find the following:

https://www.ftb.ca.gov/tax-pros/law/ftb-notices/2020-04.pdf

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 22:54:39 GMT

I understand I can file or mail Form 3115 separately. I have already filed 2022 tax returns.

Should I file Form 3115 this year for the missed depreciation for 2019 to 2022 or wait till next year to file together with 2023 tax returns ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 23:10:07 GMT

If you already filed your 2022 return, there is not much of a point.

You would most likely be better off filing the 3115 with your 2023 return (next year). Note that you need to file the 3115 with your tax return and also file a copy separately (a duplicate).

See https://www.irs.gov/instructions/i3115#en_US_202212_publink63215hd0e222

For the 481(a) adjustment, you will also need to file a statement detailing how you computed the adjustment and an explanation of the methodology used to determine it.

Again, you might want to consult a local tax professional next year.

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 23:39:05 GMT

@TAG

FYI. Found a relevant article by Turbotax on form 3115

https://ttlc.intuit.com/turbotax-support/en-us/help-article/asset-depreciation/didnt-take-depreciation-rental-property/L3q6wkHFk_US_en_US

I reviewed the form 3115.

I will need to run Turbotax (as in amended version) for 2019-2023 to get the depreciation values.

Add these annual depreciation values which I have missed into form 3115.

Let me know if I missed any steps..

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Mon, 28 Aug 2023 23:41:29 GMT

Yes; you need the total foregone depreciation figure and how it was calculated for next year.

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 23:43:33 GMT

@TAG

Thank you very much for your patience and help!

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

amyonghwee — Mon, 28 Aug 2023 23:47:49 GMT

Should be my last question 🙂

I will add this missed asset in 2023 returns and include Form 3115 for 2019 to 2022... Is this recommended approach ?

Re: Bought over 50% of rental property from my friend in 2019. How should I handle this acquisition ?

Anonymous_ — Tue, 29 Aug 2023 00:19:49 GMT

Yes, you have to add the asset at some point and next tax year (2023) would be your next opportunity.

Form 3115 is submitted with your 2023 return and a duplicate is sent to the IRS separately.