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Hahn1040

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How much detail is on a transcript from the IRS?  Would it show that details of the Schedule E or just the net figure on line 17 of the 1040?

I have a new client who sold his rental house.  I had him bring me all of the tax returns from 2011 when he first rented it.  The depreciation is different for every single year!  The issue is that he does not have the Schedule E for 2013, so I don't know how much he took....  Generally that would not be a problem because it should have been the same as 2012 and 2014.  His returns show 2012: $9,635; for 2014 $8,181...perhaps it was something in between 2015 $9,125! 

If a transcript would show the details, then it would be worth pursuing that route...

thanks so much!

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I am not sure what the transcript shows as far as the sch. E.  But if you calculate the depreciation that SHOULD have been taken each year, are you anywhere close to what was taken for the year's that you have information about?  After all, it is deprecation allowed or allowable that you are looking for - so unless you think they might have taken too much depreciation, you could just use the calculation for what they should have taken.  If they took the right amount, you are spot on.  If they took too little, you are correct in taking allowable.  You only have a possible issue if they have taken too much. 

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Depreciation can be different every year as equipment or updates are put into service or taken out. There is also bonus depreciation to look at.

Get the transcript if they can't find the return. I'm guessing it'll show it - otherwise how would the IRS know?

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oh yes!  they have taken too much!

no additional assets added- house only the entire time

2012: used purchase price (including land) ; 2014 was the only year that looks like what it should be ;  all of the other years has a cost basis (greater than purchase price)  with nothing to back it up.  He had not done any improvements; if anything the FMV, when he started renting it, was less than his purchase price. 

... so i just guess???.... do i guess high or do i guess low...ugh!

and... he already owes $70,000 before i put in the rental

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Were the returns all self-prepared?  is there any possibility of getting the depreciation records from a prior preparer?  I would at least try the transcript route if you can't get the returns faster locally.  But no matter what you do it sounds like the client is not going to be happy.  Or maybe he will  - he might be expecting to owe 80,000 without the sale of the rental and 70,000 sounds good.

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I know you know this but whatever depreciation amounts were taken reduces the cost basis of the home which in turn increases the capital gain on the sale. I wouldn't guess at all and would take Gail's advice to try and get the transcripts. However, if you can't find the information, the only alternative is to calculate what would have been allowable. Ask the client if he knows anything at all about bonus depreciation and if he has any knowledge as to whether bonus depreciation was taken? It sounds as though these returns were self-prepared. I would hope a professional would not use varying cost basis for the same asset for different tax years. 

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Rentals were not eligible for bonus depreciation until mid-September of 2018, were they?  They were able to write off some new assets as supplies (first $500, now $2500).  I'm not sure your client has a grip on this and think he left it all to the accountant, who probably muddled through the mess s/he was given.  Maybe he bought a stove, or fixed the roof, or whatever and never thought about it.  Seems like the land was depreciated too.  You are going to have to treat that amount as depreciation taken.  If it was too much, it will lower basis and increase gain.  I have to tell a client tomorrow that he owes only $60k.  Glad I'm not you.

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no additional assets;  no bonus depreciation

just the house all those years. 

He used a paid preparer but went to a different place almost every year.  He is military so some years he was in HI another in VA.   He went to the same chain the first three years.  Acting on Gail's suggestion to get the return from the previous preparer, i called an office of the chain and asked the logistics of getting the return.  So, I have sent him an email with instructions to go to the former tax office and ask for his 2013 return.  I will be curious to see if he takes the time to do it.  Both he and the wife must sign the form for the request.... some would consider that too much trouble....we'll see...  I told him that without the actual figure from the return, I would use the 2012 figure.   He had gone to the same office of the chain both 2012 and 2013. I figure that they would have had his previous year's history  there at the same office so there is some chance of consistency.  Unfortunately,  that was the highest of all of the figures.  (Full purchase price land and all)  

whatever it was they took... i will add it all up and that is what gets recaptured.

with the rental house sale , now he owes over $82,000... I didn't tell him that yet....

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