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What is the proper way to adjust an improper basis of a depreciable asset.

meoleson
Level 5

The former preparer understated the basis of the asset by $50,000 when put into service in 2002.  Tax payer was not aware of the problem until this year when he moved his account as the tax preparer never provided copies of the depreciation schedules.

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Accepted Solutions
TaxGuyBill
Level 15

Start using the proper amount, and amend the 'open' years.  Otherwise, there isn't anything else that can be done.

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12 Comments 12
Just-Lisa-Now-
Level 15
Level 15
2002 is a long time ago, are you sure the client is remembering the correct amount?  or is it real estate and its the land value that hasn't been deprecated?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
meoleson
Level 5
He provided me with the documentation and copies of checks.
Just-Lisa-Now-
Level 15
Level 15
ok, just checking...I have clients that cane remember what they paid for something a year ago, let alone 17 years ago!

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
TaxGuyBill
Level 15

Start using the proper amount, and amend the 'open' years.  Otherwise, there isn't anything else that can be done.

Terry53029
Level 14
Level 14
Can't he use 3115 ?
TaxGuyBill
Level 15
No, using incorrect Basis is a "mathematical or posting error", not a "change in accounting".
rbynaker
Level 13

What asset?  Could the $50K have been allocated to non-depreciable land?

Just-Lisa-Now-
Level 15
Level 15
that was my comment as well  😉

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
rbynaker
Level 13
I would think it's gotta be real estate if it's still depreciating after 16 years.
meoleson
Level 5
It is a shop building
Just-Lisa-Now-
Level 15
Level 15
has anything been allocated to land?  Land isn't depreciable....so if the land is 50K, that why the basis is short by 50K

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
meoleson
Level 5
It is the building only that is understated.  The purchase price of the land is correct!!!!!!!!!!!!