Claiming Missed Depreciation on Rental Property

Assuming sch E was filed from 2018 -2024, it’s a reasonable position and I’d explain to TP that IRS will accept it or not. If Sch E was not filed during that time, I don’t think I’d be that creative.

Was it rented at fair market value to an unrelated party?  In other words, was it a business with profit motive? 

Does the sale result in a gain or loss?  In other words, are you taking deductions from ordinary income that may be offset, at all, by capital gains taxed at a lower rate or not at all? 

I wouldn’t take the very long way around the barn with the Form 3115 rigmarole, but of course others would say I’m lazy and not just trying to cut the client some slack on fees.  

While it was being rented, it was being rented to an unrelated party at fair market value. 

I’m not sure I 100% understand your second question, but the sale results in a somewhat significant gain subject to a 15% capital gains rate. The allowable depreciation that is supposed to be recaptured is also somewhat significant, and offsetting it with the 481a adjustment results in a significant benefit for them.

Having to do the 3115 for a “change of accounting method” does seem odd to me and kind of like overkill, but everywhere I look seems to indicate it is the proper way to handle it. 

Yes this sounds correct and reasonable.

There is a Revenue Ruling that allows the F3115 and the Sec. 481 adjustment, but I don’t remember it.