TaxGuyBill
Level 15
06-28-2023
02:02 PM
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Using an incorrect Basis is not a method of accounting, so Form 3115 does not apply.
So you are right, amend the returns to correct the Passive Loss carryovers. And hope the IRS processes them correctly (with $0 change in taxable income and $0 change in tax, it wouldn't surprise me if they rejected it).
I suppose it might also an option to just report the correct Passive Loss carryover on the appropriate return (as if it was reported correctly, but without actually amending). But I'm not sure if I would want to try that or not.