"D. Stussy" <spam[at]bde-arc.ampr.org> wrote in message
news:gmst26$m9b$1[at]snarked.org...
- quote -

In the immortal words of Artie Johnson - VERY INTERESTING!

As most of us pros know, there is no statute of limitations on fraudulent
returns - once a fraud always a fraud and the IRS can go back to the day of
conception if they want to. AND a fraudulent return cannot normally be
corrected by amending the return (unless the amended return is filed prior
to the original due date NOT including extensions).

Normally when one is convicted of tax fraud (civil or criminal) just how is
the tax collected?

That being said, I've picked up clients who insisted on filing amended
returns that were a year or two past the statute date and the IRS has
accepted them. It's been many years ago and perhaps they have changed
things.

Reminds me of the taxpayer who wrote to the IRS and confessed - "I've been
cheating on my tax returns and now I can't sleep at night. Enclosed please
find a check for $10,000. If I find that I still cannot sleep I'll send
another $10,000."

Gene E. Utterback, EA, RFC, ABA

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"Gene E. Utterback, EA, RFC, ABA" <gene[at]alliancetax.com> wrote in message
news:gmsrm7$d2j$1[at]news.motzarella.org...
- quote -

The IRS doesn't always accept these. Back in the mid-1990's, I was a
sub-contractor to a criminal defense attorney whose client got caught for
tax fraud (and illegal insurance kickbacks). As part of his deal with the
U.S. Attorney's office, he had to file amended returns, reporting his
(higher) tax due to fraud. The IRS REJECTED the balance due returns
because they were more than 3 years late. "We smiled" as we fulfilled our
part of the deal and the client didn't have to pay after all. ;-)

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Tom496" <tomlemley[at]gmail.com> wrote in message
news:3dc771f2-35a4-4931-a26d-b78ccbbe809b[at]s1g2000prg.googlegroups.com...
- quote -

I'm not sure I follow you so I'd like to ask a clarification question (or
several) please.

Does your 2003 return include a Schedule E for a rental property and is
there depreciation included on that return?

If I read your post one way I get - our 03 return incorrectly included a
rental property. If this is correct then you certainly can amend your 03
return BECAUSE it will result in your PAYING more in taxes. The three
statute of limitations to amend is mostly about getting more refund money
back. You can always amend to pay more taxes.

If I read it another way I get - 04 was the first year our returns included
a rental property but the placed in service date is listed as 03. If this
is correct it should be a simple matter to just change the date placed in
service for future calculations.

Depreciation of rental property is mostly a straight line calculation. If
you're entitled to a full year's depreciation then you get a full year. If
the property was rented for all of 04 then you're entitled to all of the 04
depreciation. The difference in depreciation because of a wrong in service
date will only matter if the first year was incorrectly reported as a full
year when it was really supposed to be a partial year - and the closer to
the beginning of the year it was actually placed in service, the lesser the
variance.

Form 3115 can be used to correct incorrect depreciation claimed in prior
years but is not to be used ONLY to change an in service date. With the
caveat that neither I nor anyone else here can tell you exactly what to do
without first seeing all the paperwork, I doubt that you have any
requirement to amend any of the years in questions to correct the
depreciation, it should be sufficient to simply calculate the correct amount
of depreciation "ALLOWED OR ALLOWABLE" and adjust your basis in the
property so that when you finally sell the house you pay tax on the correct
amount of gain.

As for the prior accountant not allowing the passive losses, I'm curious as
to why he did NOT allow them. His assessment may have been correct if you
were not actively involved in them. But in my experience even the most
remote of owners still keeps a hand in the operations sufficiently to make
Active Participation so that the losses are allowable.

As a side note - because the original losses were treated as suspended they
do get carried forward until you dispose of the property so you'll need to
keep the records related to the rental activity until you sell the house.
You will need to report the suspended losses on that return along with the
recapture of depreciation claimed as well as any gain from appreciation.

Good luck,
Gene E. Utterback, EA, RFC, ABA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Tom496" <tomlemley[at]gmail.com> wrote in message
news:3dc771f2-35a4-4931-a26d-b78ccbbe809b[at]s1g2000prg.googlegroups.com...
- quote -

Since your depreciation base is limited to the LESSER of your basis or FMV
when you converted the property to business/rental use, and in 2003-2004,
real estate prices were generally increasing, I don't see the need for a
change in depreciation method for form 3115. You would NOT be changing the
base number that depreciation is computed on. However, as you took a year
that you're not entitled to and cannot amend that year, then you may
execute a corrective option of ending the depreciation one year early.
Regardless, the amount will be recaptured when you sell the property and
the error will wash out then.

"Disallowed" passive losses: They aren't disallowed but carried forward.
In most cases, you get them anyway, some year.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Hello,

My wife and I bought a house to live in in 2003 and lived in it until
2004, when we rented it out and moved abroad. We moved back into the
house in 2006. An accountant prepared our returns for 2003, 2004 and
2005. In preparing my 2006 return, I reviewed the previous returns and
noticed for the first time that the accountant erroneously used the
'03 purchase date as the "placed in service" date (and began treating
it as rental property, including taking depreciation) rather than the
'04 date when we converted it to rental property. We are past what I
understand to be the the three-year-after-filing statutory period for
filing a 1040X for '03 and '04, but it has been (just barely) less
than three years since the '05 return was filed. We've not yet filed
for 2006.

I assume the miscommunication with our accountant that resulted in the
erroneous "placed in service" date constitutes a "mathmatical error"
or "posting error". Thus, it appears I can file a 1040X for 2005, but
not for 2003 OR 2004. Having misseed the deadline to amend
depreciation for 2003 and 2004, my reading seems to indicate I need to
file form 3115 to set the record straight for those years. However,
the instructions for form 3115 at "Schedule E - Change in Depreciation
or Amortization" states "Do not file Form 3115 (4) to change the
placed-in-service date." Thus, I do not understand the appropriate
way to correct the depreciation information for 2003 and 2004.

I should add that, on the 2005 1040X and 2006 returns, we plan to
allow ourselves the passive losses on the rental property under Form
8582 Special Allowance for Rental Real Estate with Active
Participation. Our accountant dissallowed the passive losses for
rental real estate on the 2003, 2004 and 2005 returns.

Any assistance or guidance would be greatly appreciated.

Thanks,
Tom496

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >