Rental property since 2010 but land in the basis for the last eight years. Amend all eight years? Or split the excess depreciation by 3 and amend only 2015 2016 2017?

[RCBCPA]

Over Kill:  My take is to continue depreciation of the property unless the land value is large. Not worth the effort or cost to amend.  

[PhoebeRoberts]

Really overkill: Are you required to file a Form 3115?

[rbynaker]

I've done a 3115 in the past for these.  Changing from an impermissible method (depreciating land) to a permissible method (not depreciating land) seems a bit odd.  I'm not sure it's the right way to do it, but my problem was I'm not willing to sign a return with land depreciation on it.

[itonewbie]

I'd agree F.3115 seems to be the way to go.  Once the basis for land has been depreciated for more than 1 year, an (impermissible) accounting method is deemed to have been adopted.  You may not, therefore, simply amend the last 3 years' returns to retroactively change an accounting method.

[TaxGuyBill · Accepted solution]

Viewpoint #1:  You are incorrectly depreciating land.  The way to correct prior returns is by using Form 3115 on the current year return.  The repayment of the over-claimed depreciation would either be on the current year return or spread out over 4 years.

Viewpoint #2:  You are depreciating too large of a Basis for the house (the 4562 only showed ONE asset being placed in service, not the land).  IF the taxpayer wants to do it, you can amend the last 3 years to correct those years.  For the current year, depreciate the home using the proper Basis (Form 3115 is not required to change that) and enter the "prior depreciation" that was actually claimed in the prior years.  At whatever point the property is sold, there will be a larger amount of Unrecaptured Section 1250 Gain due to the over-claimed depreciation.

Both are probably valid viewpoints.  Unless there reasons to do it differently, I lean towards #2 (partly because I'm lazy and try to avoid Form 3115 ).