A client depreciated Residential for 50 years S/L. Now how do I correct this.In the system shows zero due to 27.5 years Depreciation .how Do i enter the correct amount.

[tonyjoeramirez]

New Client Depreciated residential rental property for 50 years S/L (Manually), after I enter the amount of prior depreciation, the system is defaulting to zero, due to the 27.5 years for rental property.  Example -  lets say he has owned the property for 35 years and there is still $5000 left of depreciation.  Now when i enter the asset into the system, the software is telling me that he has $0 left for depreciation because its calculating on 27.5 years. But we need to  account for the remaining $5000 .  How would I enter the remaining depreciation to correct the proper remaining depreciation for that asset. Please advise

[TaxGuyBill]

What is the exact "placed in service" date?
Is the property in the United States?

[tonyjoeramirez]

Residential home Placed in service 4/1/1977, its been 41 years depreciated for 50 years S/L

[tonyjoeramirez]

In California

[TaxGuyBill]

I'm not familiar with the depreciation rules from that long ago, but *IF* 50 years was allowable, then you should be able select code "O" for the asset type, and then scroll WAY down to the bottom of the Asset Entry Worksheet and fill in the Recovery Period.  It is possible you will need to override.

If 50 years was not allowable and the depreciation period was supposed to be 40 years or less, than as Skylane said, it is over and done with.  But as I said before, I'm not sure what the rules were back then, so it is possible that 50 years was allowable.

Out of curiosity, did they also use a "Salvage Value"?

[tonyjoeramirez]

The individual did things the old fashion was, paper and pencil.  he basically depreciated for 50 years
the Publication 527 for 2018 ," you can change your accounting method to claim the correct amount of depreciation." I think I found my answer to correct the amount of depreciation, now I just need to input on to the schedule, without pro series giving me an error

[TaxGuyBill]

Changing the Accounting Method (Form 3115) wouldn't really work if the proper depreciation period was already over years ago.

But as Poolcleaner said, it is probably right so you don't need to worry about that.

[tonyjoeramirez]

Thank you all

[poolcleaner · Accepted solution]

I'm pulling this from my ancient past but before 1981 you could use any reasonable method (including the asset's life) for depreciation including straight line. I'm with TaxGuyBill in that using O would let you claim the remaining years of depreciation. It sounds as if it has been done correctly all these years.  The date in which it is placed in service is critical here.

[tonyjoeramirez]

Thanks

[George4Tacks]

I agree. I don't know the codes for ProSeries, but 50 year straight line starting in 1977 still has a couple of years left. The next question is, did the basis include land?

[tonyjoeramirez]

no , no land included , only the portion of the bldg

[Skylane]

Others can weigh in, but I think legally the depreciation term is long over... and if it wasn't claimed then it is lost.  

to enter the asset in pro series as the previous preparer did , then you should be able to choose 'type of asset as Other, then, enter data at the bottom of the worksheet  chose amortization with a 50 year recovery period.... 

[tonyjoeramirez]

Every year he has been claiming the Depreciation,  still active just at a wrong amount