[taxchat] Form 3115 (Change in Accounting Method)

 

 

 

 

Amazingly enough, I've never had to do one of these before, but I have a new client this year whose former preparer has totally missed depreciating 6 different assets, and also did not start depreciating a building until 3 years after it had been put in service!

 

BUT, they sold this business during 2007.  If I'm reading the instructions correctly, they cannot make this correction if "the tax year of the change is the final year of a trade or business for which the taxpayer would be required to take the entire amount of the section 481(a) adjustment into account in computing taxable income."

 

This being the case, is there any recourse?  If I amend 2006 and make the 3115 adjustment on that year, they hardly get the benefit of it since their income wasn't as high as it is this year with the sale.

 

I'm thinking I can't prepare the 2007 return with the "allowed or allowable" depreciation on it (to figure the taxable capital gain of the sale), and then later amend the 2007 return to fix and take the missed depreciation (because it's already in the calculation for the sale).

 

I'm confused, and I'm sure I sound like it.

 

Any suggestions or ideas?

 

Thanx

 

Terri L. Ryman, EA
SOUTHWEST TAX & ACCOUNTING
503 Morton, Box 1367
Elkhart, KS  67950-1367

 

620.697.2422 Phone

 

620.697.4757 Fax

 

tryman@elkhart.com

 

 

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