Sale of a rental property

Forum|Forum|1 year ago
August 13, 2024
2 replies
11 views

Have a client that sold a rental property in 2023. Property first purchased in 2012 and I have a copy of the filed return for that first year from the prior tax preparer. Client now coming back trying to add detail of 2012 improvements made that did not appear to have been included in the depreciation detail before. I know darn well that client is trying to reduce their tax liability though the detail looks reasonable. At the moment I'm not comfortable with this. Have any of you been in a situation like this? Thanks-jl!

ProSeries Professional

This topic has been closed for replies.

T

TaxGuyBill

Level 15

If you believe it, go for it. But you will need to file Form 3115 to 'catch up' on the missed depreciation (and charge the client a hefty fee for doing so).

If you don't believe it, ask for more documentation until you believe it, or don't do the tax return.

J

jblynchAuthor

Level 3

Thanks for responding as the 3115 and catchup that would really be a boomerang as the property was sold so any presumed "catch-up" would then also become a recapture on the sale-a big added and complicated net zero....though I may be missing something so will also consider all of that and a thanks for bringing it up!-jl

T

TaxGuyBill

Level 15

@jblynch wrote:

would then also become a recapture on the sale

There will be gain due to the depreciation whether you claim it or not. Depreciation that is "allowed or allowable" reduces Basis, so even if you don't claim the depreciation, it will be taxed. File 3115 or you are wasting a deduction because it will be taxed whether it is claimed or not.

J

judys3

Level 6

Without knowing the scope of what they are trying to add would it have been something that was just expensed in prior years? And now they are wanting to add to basis of sale?

T

TaxGuyBill

Level 15

@judys3 wrote:

would it have been something that was just expensed in prior years?

Excellent point. That should be the first thing to check.

Sign up

Login with SSO

Let's get you signed in

Login with SSO