How is TurboTax calculating depreciation?

[Mike20878]

I'm working on back taxes for a client and I have their 2010, 2011 and 2012 returns. They rent a townhouse on Schedule E and the depreciation is listed as follows:

Cost (net of land): 169,518
Land: 126,500
Business Use %: 100
Depreciable Basis: 169,518
Life: 27.5
Method/Convention: SL/MM
Prior Depreciation: 81,310
Current Depreciation: 10,429

I input the cost info, etc. into our system (ProSystem fx) and current depreciation calculates as $6,164.

I have no idea how TT is arriving at $10,429. Then, all of a sudden, the 2012 return shows $12,968.

At first I thought maybe it was including the land in the calculation but I come up with $10,764.

Thanks,
Mike

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[remove ps]

Mike20878 wrote:

> I'm working on back taxes for a client and I have their 2010, 2011
> and 2012 returns. They rent a townhouse on Schedule E and the
> depreciation is listed as follows:
>
> Cost (net of land): 169,518
> Land: 126,500
> Business Use %: 100
> Depreciable Basis: 169,518
> Life: 27.5
> Method/Convention: SL/MM
> Prior Depreciation: 81,310
> Current Depreciation: 10,429
>
> I input the cost info, etc. into our system (ProSystem fx) and
> current depreciation calculates as $6,164.
>
> I have no idea how TT is arriving at $10,429. Then, all of a sudden,
> the 2012 return shows $12,968.
>
> At first I thought maybe it was including the land in the calculation
> but I come up with $10,764.

169518/27.5 = 6,164.290909090909

So 6164 looks correct. I have no idea about why TT does that.

[JoeTaxpayer]

On 7/11/13 7:48 PM, remove ps wrote:
> Mike20878 wrote:
>
>> I'm working on back taxes for a client and I have their 2010, 2011
>> and 2012 returns. They rent a townhouse on Schedule E and the
>> depreciation is listed as follows:
>>
>> Cost (net of land): 169,518
>> Land: 126,500
>> Business Use %: 100
>> Depreciable Basis: 169,518
>> Life: 27.5
>> Method/Convention: SL/MM
>> Prior Depreciation: 81,310
>> Current Depreciation: 10,429
>>
>> I input the cost info, etc. into our system (ProSystem fx) and
>> current depreciation calculates as $6,164.
>>
>> I have no idea how TT is arriving at $10,429. Then, all of a sudden,
>> the 2012 return shows $12,968.
>>
>> At first I thought maybe it was including the land in the calculation
>> but I come up with $10,764.
>
> 169518/27.5 = 6,164.290909090909
>
> So 6164 looks correct. I have no idea about why TT does that.

This is a simple calculation. I have a rental, and the depreciation
looks right, 1/27.5th of the non-land value. I'm guessing user input
error, no offense.

[Pico Rico]

"Mike20878" <mro...@gmail.com> wrote in message
news:098d3334-ee02-4c51...@googlegroups.com...

> I'm working on back taxes for a client and I have their 2010, 2011 and
> 2012 returns. They rent a townhouse on Schedule E and the depreciation is
> listed as follows:
>
> Cost (net of land): 169,518
> Land: 126,500
> Business Use %: 100
> Depreciable Basis: 169,518
> Life: 27.5
> Method/Convention: SL/MM
> Prior Depreciation: 81,310
> Current Depreciation: 10,429
>
> I input the cost info, etc. into our system (ProSystem fx) and current
> depreciation calculates as $6,164.
>
> I have no idea how TT is arriving at $10,429. Then, all of a sudden, the
> 2012 return shows $12,968.
>
> At first I thought maybe it was including the land in the calculation but
> I come up with $10,764.
>
> Thanks,
> Mike
>

are there depreciable items other than the house as a whole? Like maybe at
some point new appliances or windows were put in with a different life?

[MTW]

I haven't use TT in over 15 years, so I can't say if this info is still current. But at one time, if the PRIOR accumulated depreciation number appeared too low, they would include a "make up" calculation that added a pro rated portion of the shortage to the CURRENT amount. That sort of makes sense, but I'm not sure it is truly an allowable method for tax purposes (I believe there is a Rev Proc that explains how to correct for prior year depreciation errors).

So I suppose I would check the accumulated depreciation amount to see if it appears correct, etc.

MTW

[Bob Sandler]

In another forum where the OP posted the same question, he
posted the following additional information this morning.

"I spoke to the client this morning and it gets pretty
complicated. Apparently they put the basement into service
in '91, rented the entire house starting in '95, moved back
in '04, then started renting it again mid-2007. Apparently
TT took the remaining basis over the remaining ~10 years.
Unfortunately, TT Online doesn't show any detail on the
calculation. And for some reason, the back returns don't
show a depreciation schedule when you download the PDF
copies."

https://ttlc.intuit.com/questions/1890773

[Pico Rico]

"Bob Sandler" <bob_u...@yahoo.com> wrote in message
news:1vb0u8pska503u4rs...@4ax.com...

> In another forum where the OP posted the same question, he
> posted the following additional information this morning.
>
> "I spoke to the client this morning and it gets pretty
> complicated. Apparently they put the basement into service
> in '91, rented the entire house starting in '95, moved back
> in '04, then started renting it again mid-2007. Apparently
> TT took the remaining basis over the remaining ~10 years.
> Unfortunately, TT Online doesn't show any detail on the
> calculation. And for some reason, the back returns don't
> show a depreciation schedule when you download the PDF
> copies."
>

ok, never mind TT for this: how do you handle a rental, return to personal
use, then return to rental. How do you handle the depreciation on the
second turning to rental use? Take the adjusted basis and start at 27.5
years again?

[paulthomascpa]

"Pico Rico" <Pico...@nonospam.com> wrote

> ok, never mind TT for this: how do you handle a rental, return to
> personal use, then return to rental. How do you handle the depreciation
> on the second turning to rental use? Take the adjusted basis and start at
> 27.5 years again?

Start depreciation, stop depreciation, resume depreciation. I would NOT
restart the 27.5 year clock with the return of the property to rental use.





--
Paul Thomas, CPA
www.paulthomascpa.com
Watkinsville, Georgia

[Pico Rico]

"paulthomascpa" <paultho...@bellsouth.net> wrote in message
news:ypidnUkvOIwai3nM...@giganews.com...

>
> "Pico Rico" <Pico...@nonospam.com> wrote
>> ok, never mind TT for this: how do you handle a rental, return to
>> personal use, then return to rental. How do you handle the depreciation
>> on the second turning to rental use? Take the adjusted basis and start
>> at 27.5 years again?
>
>
>
> Start depreciation, stop depreciation, resume depreciation. I would NOT
> restart the 27.5 year clock with the return of the property to rental use.
>
>

so you ultimately get the full 27.5 years of depreciation, assuming it is a
rental for that total period of time?


How about a vacation home that you prorate the depreciation based on partial
personal use? Can you ultimately get ALL the depreciation over a period
longer than 27.5 years?

[Mike20878]

On Monday, July 15, 2013 11:34:44 AM UTC-4, paulthomascpa wrote:
> Start depreciation, stop depreciation, resume depreciation. I would NOT
>
> restart the 27.5 year clock with the return of the property to rental use.
>

So basically, you still have the same basis (assuming no decrease in FMV below) and A/D that you continue to depreciate. I wouldn't necessarily say that the clock doesn't restart, just that you still use a 27.5 yr life. Basic SL rules should still apply, in this case taking $6164 per year. I don't believe TT was correct to pick up again at the next in-service date and take the remaining ~10 years. The fault may have been in using the original in-service date again, whereas maybe he should have used the 2007 date.