In 2024, we sold a rental property that was co owned by three siblings, my two sisters and me. I solely managed and collected the rents during our ownership. We never claimed the depreciation during our ownership.In this situation, how to assign the depreciation recapture among three of us? And who should be the one to file Form 3115?

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Depreciation Recapture

Forum|Forum|1 year ago
March 25, 2025
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In 2024, we sold a rental property that was co owned by three siblings, my two sisters and me.
I solely managed and collected the rents during our ownership. We never claimed the depreciation during our ownership.
In this situation, how to assign the depreciation recapture among three of us? And who should be the one to file Form 3115?

You should allocate the depreciation recapture the same way you reported the income and expenses for the rental property? Did you report on a Form 1065 Partnership return. If so, you file Form 3115 with the 1065 and the depreciation recapture is allocated via the K-1s. If each of you reported a third of the expenses on their personal tax return, each of you will need to report the sale of a third of the property, and would file their own Form 3115 if necessary. You would each have your own depreciation recapture as part of reporting the sale.

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B

By55Author

I was the only one who managed the rental property and reported rental activities on my returns. My two sisters never collected rent or reported any rental expenses on their tax returns. I was the only one who did that.Do they need to file form 3115?

PatriciaV

We are working on section 481(a) adjustment.

My accountant and I have different thinking.

We have a net negative adjustment, but we can not be sure “ Yes “ or “ No “ answer on question 28 that asked “ Is the applicant making an election to take the entire amount of the adjustment into account in the tax year of change? “

I need help clarifying the meaning of this question and the answer “ Yes “ or “ No “ for this question.

Thank you.

Because you never claimed depreciation in the past, you are now electing to claim an adjustment equal to all prior depreciation. And you are making this adjustment this year, which is the year of the change.

If you were amending last year's return and reporting some of the adjustment on that return, you would answer "no" to this question.

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