Due to using part of their (just-sold) house as a business in tax years 97-99, parents need to retrieve 1040's for those years. They just completed a move and as of yet are unable to find them.
Their tax preparer is retired (he hasn't been contacted yet). If he doesn't have copies, how would they get the needed info? I think I read on the IRS site that they only go back 6 years for retrieval.
If this was a home office or storage of inventory, you won't need 1997. Such use prior to May 1998 is exempted from recapture.
Preparers are only required to keep returns 3 years. If the preparer retired more than 3 years ago, you might be SOL.
========================================= MODERATOR'S COMMENT: Correction: Only depreciation on or after May 6, 1997. See Page 9
So if he doesn't recapture depreciation, how will the IRS know that there is anything to recapture? And supposing that they magically know that there is an amount to recapture, how do they know the amount when they send you a tax bill?
At worst I guess the OP can recreate the depreciation from 1997 to
1999. The basis for depreciation will be the lower of cost basis (which is purchase price plus additions), or FMV in 1997. Most likely the lower value will be the cost basis, but that's a wild guess. Then exclude depreciation for the first 5 months and 6 days of 1997 from recapture.
Thanks for the correction. (At least I was close.)
Note that if there were depreciation in later years, chances are it's on the same schedule as covers the years in question, so recreation may be trivial - just look up the percentage in the appropriate table.
As much as people might think the IRS has a record somewhere and is just waiting to jump on this case saying "AHAH! he forgot to recapture this depreciation in our files!", it just won't happen. This is another way of saying that even if taxpayer "forgot" to calculate the recapture and duly include said income, IRS wouldn't notice.
So in the absence of records, with this fellow being a new client of mine, we would simply sit down and guesstimate to best of his ability what that recapture amount might be, slap it on form 4797 etc and continue to march.
As for preparers keeping copies of tax returns, they are not required to do so. If I have the necessary lists of clients for whom I've prepared returns during the last three years, my files can be at a bare minimum, consisting only of W2's, 1099R's, etc, and signature forms.
ChEAr$, Harlan Lunsford, EA n LA
I have never met a preparer who keeps "a list" of returns prepared. All that I know usually satisfy the requirement by keeping a copy of the actual return.
Ah... and now you have.
When first in business I kept a copy of all three returns prepared each year for clients, but gradually came to a realization that it is not my job to maintain client copies, so I reduced holding period to 5 years. Then with modern software which preserves the information, no need to keep copies which may be re produced electronically, hence the list which is prescribed by regulation as acceptable. In fact the regulation dates back to 1974 as far as I know.
ChEAr$, Harlan Lunsford, EA n LA
OK, but if you're keeping the data, you're still keeping a "copy" - just in electronic form.
Well, it WOULD be a copy if I printed it to file as a *.pdf copy and stored it, but I don't. (Some preparers do that.) Only the tax return data resides on my hard drive so that I may create a copy at will.
ChEAr$, Harlan Lunsford, EA n LA
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