Negative 481 adjustment

Forum|Forum|3 years ago
June 7, 2023
3 replies
17 views

Depreciation was not deducted since 2013. Rental was sold Jan 3, 2022, and was NOT rented in 2022. From what I understand the over $90K in depreciation which was allowable and reduced the basis of the sold rental can be deducted in 2022 by filing Form 3115. My question is since there is NO Sch E for 2022, and unless I override the adjustment line as it won't allow me to add a 481 adjustment as an adjustment, where do I put the amount of the adjustment? If I override Sch 1, Part II and manually add the adjustment, red flags abound for efiling.

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sjrcpa

Level 15

I'd put it on a Schedule E. That's where it would have gone if it had been claimed in the first place.

The more I know the more I don’t know.

Just-Lisa-Now-

Intuit Community Champion

why was it not rented in 2022? was it still available for rent, just couldn't get an acceptable renter? was it being remodeled or ?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

U

uhtaxmbaAuthor

Level 4

Thanks for your reply, but you did not read my original email very thoroughly. The answer to your question is in the original question.

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TaxGuyBill

Level 15

@uhtaxmba wrote:

Depreciation was not deducted since 2013.

Back up a little bit ... was depreciation never claimed? Or was it originally claimed on older returns, including the year it was "placed in service"?

If depreciation was never claimed, I agree, file the 3115 and create a Schedule E just for the §481(a) Adjustment. If it was correctly depreciated in the first year of service, then there are other problems.

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uhtaxmbaAuthor

Level 4

It was never claimed. Tax returns were self prepared in previous years. Folks think just because they don't claim depreciation that when they sell the rental that the basis won't be reduced. But it is "allowed or allowable". This almost seems too good to be true. Confirm for me that since there was NO depreciation claimed that they can take a negative adjustment for what would have been the total depreciation since they put the house into service. Seems too good to be true.

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TaxGuyBill

Level 15

@uhtaxmba wrote:

It was never claimed ... Confirm for me that since there was NO depreciation claimed that they can take a negative adjustment for what would have been the total depreciation since they put the house into service.

That is correct (assuming you file Form 3115 to make that change).

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