RENTAL cost basis entered wrong 10 years ago

[mag1949]

Ten years ago I purchased a house to be a rental. TT asked me for land value as well as building value. I got the land value from the county assessor and the cost basis from escrow papers. Before renting out, I put 60k of improvements into the land and 10k into the building. None of the improvement amounts were included in the TT values. Now I have sold the rental. TT won't allow me to enter the capital improvements to adjust the gain. Land doesn't get depreciated but should be allowed to be added to the basis of the cost at some point. IRS only allows 3 years of amendments. The amt of depreciation would be negligible if I did amend. 

If I did amend (IRS allows only 3 years), what happens to the other 7 years?  Do I suddenly say the capital expenses were added in the first of the 3 years that I amend?  Where in TT? And how to I amend land expenses?  Does improvement to the land actually go under improvements to building?  

This doesn't make sense to have to amend some returns. Is the alternative to just loose the 70k in capital expenses?

1. Am I required to do any amendments? 

2. Do the first 7 years of calculated dep remain what I put in and do I recapture what the first 7 year depreciation was filed as OR do I refigure the depreciation for the 7 years and have to pay that back?

3. If the improvements were to the land and land is not depreciated, how is that accounting for in the amended return and if it can't be accounted for, where can I add it back to get the correct basis for determining cap gain?

4. If I were just go back 3 years, how do I restate the land and building value?  What values do I use?

5. Do I do all 10 years of amendments to figure out the dep that it should have been, and just turn in the last 3?  What happens to the figures from the first 7 years. 

This doesn't make any sense. 

[Mike9241 · Accepted solution]

you will probably need to hire a tax pro because the tax laws require you to recapture as income any depreciation you did not take but should have. This is done by filing form 3115 with the current return which catches up on the missed depreciation. The depreciation correction is for all years you rented the property so amending is not an option.  

most land improvements are depreciable, like drainage and irrigation systems, landscaping, parking lots, driveways, walkways, outdoor lighting, or fencing, etc.  Some of these may have a 7-year depreciable life, others 15.

some versions of Turbotax include the 3115, but considering the task ahead of you in refiguring the depreciation that should have been taken over the last 10 years may be a daunting task and the properly completing the form and your tax return

here's a link to the iRS page for the form and instructions in case you want to attempt this yourself.

[mag1949]

Thanks for that info.