topic Never took depreciation for rental house since 2006. Sold house in 2015. Should amount of depreciation taken in prior years be $0 or the amount Turbo Tax put in? in Investors & landlords

Never took depreciation for rental house since 2006. Sold house in 2015. Should amount of depreciation taken in prior years be $0 or the amount Turbo Tax put in?

skeckowski — Sat, 01 Jun 2019 00:31:44 GMT

We have used turbo tax for several years. Is there something else we need to do?

schedule e 24

twotimmys — Sat, 01 Jun 2019 00:31:46 GMT

schedule e 24

The key phrase in the Internal Revenue Code is "allowed o...

RPV — Sat, 01 Jun 2019 00:31:48 GMT

The key phrase in the Internal Revenue Code is "allowed or allowable." That refers to the reduction of basis for depreciation. That is, the basis is adjusted by subtracting "allowable" depreciation even if you didn't claim it.

But all is not necessarily lost. Recompute income or loss on the house for each year going all the way back, this time deducting depreciation. Typically, at least if you also have mortgage interest to deduct, that will produce a tax accounting loss even if cash flow is positive. You may not have been able to deduct that entire loss even if you had claimed it timely due to passive loss limitations, in which case the disallowed passive loss is carried forward. In 2015, when you sold the house, you should be able to deduct the entire passive loss that was previously disallowed and carried forward.

If that doesn't work, I can only suggest amending your returns (Form 1040X) for all open years.

So, in the property sale year you can deduct passive loss...

mostlywind — Sat, 01 Jun 2019 00:31:49 GMT

So, in the property sale year you can deduct passive losses from years that are prior to years available for amending? Passive losses never reported due to 1040X amendment years being closed