depreciation allowed or allowable

Depreciation on renal property is not "allowed", it's "required".

I recommend you file amended returns for the prior years. Joe

I'm with you, Ben. There IS something but I cn't recall where, probably saw it on boards somewhere. Seems to me it was something buried in info about a change in accounting methods. Try googling some key-words.

ed

And it has something to do with form 3115 and claiming past depreciation on an amended return.

ChEAr$, Harlan Lunsford, EA n LA

Well, Harlan, and Joe, at least it can be done even if we didn't know where to look.

ed

So long as the first return you need to amend is less than 3 years old. So you can amend 2007, 2006 and 2005 (which was due in Apr, 2006). I'd not second guess Harlan as I'm not familiar with 3115.

Joe

depreciation is NOT required. Treating depreciation as having been taken IS required.

========================================= MODERATOR'S COMMENT:

- point taken.

Could you be thinking of RP 2002-09 and RP 2004-11? See the link below for an explanation:

Well, this seems to be huge. Not huge, like when the person who started reading got to sec 401(k) and realized this meant, well, we can have

401(k) accounts, but huge for those it impacts. a link right to the IRS site, which is the source of the bulletin your guy references. Are bulletins like this considered 'law', or is it similar to letter rulings that are not universally applicable? I never claim to know everything, nor can I read everything, but you'd think this would have gotten more press. Joe

Tax Law 101:

There is a hierarchy when it comes to citing tax authority. Statutory, administrative & judicial sources provide primary authority that makes up "Tax Law."

Statutory sources include the US Constitution, tax laws and tax treaties. Tax law is embodied in the Internal Revenue Code (IRC). This is actually Title 26 of the US Code.

Administrative sources include Treasury Department regulations (official interpretation of the IRC), IRS Revenue Rulings (application of the IRC & Regs to a factual situation), IRS Revenue Procedures (IRS practices & procedures for administering tax law). Once you get past Revenue Procedures, there are a slew of other pronouncements that are of a benefit. They typically deal with a narrow focus and are limited to the specifics of the case and provide useful information to taxpayers and professionals.

Judicial sources are all the rulings of the federal courts (district courts, federal claims court, tax court, Circuit Court of Appeals and SCOTUS).

Only primary authority may be cited as proof of "substantial authority" in support of a taxpayer's position. I haven't looked in a long time but all the administrative source items that are published in the IRB (Internal Revenue Bulletin) plus Congressional intent are primary authority for citation. The IRB includes the items above plus various memorandums, letters, notices, announcements, and action on decisions. The statutory and judicial decisions complete the citation landscape.

impacts.http://www.irs.gov/irb/2004-03_IRB/ar11.html> is a link right to the IRS site, which is the source of the bulletin> your guy references. Are bulletins like this considered 'law', or is it> similar to letter rulings that are not universally applicable?>

Why does changing your accounting method fix the problem? Is it that under the accrual method of accounting, you cannot take depreciation (so that when you dispose of the property you don't have to add back depreciation taxed at 25%)?

So are you saying you can then file amended returns 7 years back, or that you can just forgot about the depreciation that was allowed but you didn't take?

No amended returns were involved. A single form 3115 was filed with the current-year return, covering the previous seven returns (the current-year return was, obviously, done correctly :). The 3115 resulted in a one-time extra depreciation expense of $10,000+ which went on the current-year return.

Basically, the 3115 preparer re-computed what the depreciation would have been over the seven years if it had been done right, compared that to what was actually taken (what was actually taken was over $10,000 too low), claimed the difference as a current-year depreciation expense, and then filled out 3115 (with attached paperwork) explaining what he had done and explaining/justifying his position that the messed up depreciation constituted an accounting method and was therefore eligible for this treatment (as opposed to being mere error).

-- Rich Carreiro snipped-for-privacy@rlcarr.com

In addition to Rich's comments, this procedure is available for an open year. In other words, if you disposed of the property in

2006 and reported the sale in 2006, the year of change for implementing this procedure is 2006, and you would amend 2006 and attach the 3115 to that amended return. If you disposed of the property in a closed year, say 2004 for example, then this procedure is not available.

I would assume most people who screw up their depreciation will also, upon sale, show their basis as that calculated using their erroneous depreciation over the years. In this situation, how many years must pass before the sale year tax return is not subject to IRS scrutiny? Assuming no fraud, will the IRS be precluded from looking at the sale year return in future years when it is not possible to amend the sale year return?

If you are asking what if someone just reports the gain on sale with an overstated cost basis because there was no or too little depreciation taken w/o any willful intent, then the normal statute of limitations for assessment applies: 3 years from filing or 6 years if there is a 25% understatement of gross income.

Thanks-I think thats what I was looking for

(will print those rev-procs out, put them under my pillow tonight & see what sinks in)

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