If a rental property is sold without any deprecition taken in the past. Can prior year depreciation amount be entered as 0?

Less tax will also be due if you add amounts to basis for fairy dust.  Imaginary numbers for imaginary improvements.  Some might call it cheating, but if IRS doesn't catch it, do you care? For that matter, if you don't subtract depreciation allowable from basis, what's to prevent you from later filing amended returns to get refunds?  It's not like IRS is going to match up other returns to see if the same property was later sold.  And yes, you could go back 20 years, if taxes are still owed for prior years.  

@PC2025 

You've already asked about this a few times. Here's one:

https://accountants.intuit.com/community/proconnect-tax-discussions/discussion/miss-depreciation-in-the-past-will-end-up-pay-more-tax-when-sale/00/305106

When selling a rental property, you have to pay taxes on the recapture of the depreciation that you should have claimed, even if you never actually claimed it.  Yes, that's as bad as it sounds.

There is a solution, but it's complicated.  In the year of sale, the IRS provides the ability to use DCN 107 to fix past depreciation using form 3115.  It's a complicated form to complete, with supporting statements and calculations, but the result is you can claim the past missed depreciation error, and recapture it in the same year.  

No, you cannot enter "0" for prior depreciation if none was taken in the past. The IRS requires you to account for allowed or allowable depreciation when selling a rental property, even if you did not claim it. This results in depreciation recapture, which is taxed as ordinary income. Therefore, skipping the depreciation claim in prior years won't eliminate ordinary income tax; you'll still face recapture and capital gains taxes.

@MikeHuston1 

Read up on "allowed or allowable" depreciation.  Then get back to us with support for your statement.

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@MikeHuston1 wrote:

If no depreciation was taken on the rental property in previous years, then:

• No depreciation recapture is needed when you sell the property.

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Unfortunately, that's not what the tax law says in this situation.  I don't know if you read any of the previous messages, but I explained the tax law and cited references.  I'll explain it again here:

Even if you didn't claim depreciation when the property was a rental, you are still required to recapture the deprecation that you were supposed to have been claiming.  This is defined by tax law under § 1250(b)(3) and § 1245(a)(2) and the terminology "allowed or allowable".  Notice that "allowed or allowable" is repeated multiple times in the tax code, and in IRS publication 544, for example:

"Depreciation allowed or allowable. The greater of the depreciation allowed or allowable is generally the amount to use in figuring the part of gain to report as ordinary income. ... If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight-line method."

This is a significant and common issue and they were misinformed or unaware of the depreciation requirement.  And then when they go to sell the property they face this issue of depreciation recapture of the "allowed or allowable" depreciation even though they failed to claim it for all the past years should have.  To address this situation, the IRS established that this mistake can be fixed with a DCN 107 accounting method change using form 3115. 

I’ve been reading through this thread, and it’s eye-opening how tricky this depreciation stuff gets when selling a rental property. I was hoping that if no depreciation was taken in the past, I could just enter "0" for prior years and keep it simple—less tax with just capital gains sounded nice. But from what everyone’s saying, it doesn’t work that way because of this "allowed or allowable" rule. That’s a bummer since it means recapture tax hits you even if you didn’t claim it before.

The Form 3115 idea with DCN 107 sounds like a decent fix—claiming all the missed depreciation in the sale year—but it looks complicated. I’m wondering if it’s worth the hassle if the tax ends up close to what I’d pay by skipping it and risking an audit. Those tax software experiments showing the numbers were super helpful, though—makes it clearer how big the difference can be. Has anyone here actually filed a 3115 for this and found it easy enough to do without a pro? I’m new to this forum and trying to wrap my head around it, so any real-world tips would be awesome!