Form 3115 Rule

by Tom Copeland

 

Providers can deduct previously unclaimed depreciation all in one year, according to IRS Revenue Procedure 2004-11.  Previously unclaimed property can include: the home, home improvements, appliances, furniture, and large play equipment.

There are five major guidelines. To deduct previously unclaimed depreciation in the year you file Form 3115 Application for Change in Accounting Method:

You must be in business;

You must own the property you want to deduct; 

You must be using the property you want to deduct in your business:

You must file one copy of Form 3115 before filing your tax return in the year you want to claim depreciation deductions on your tax return;

You must file another copy of Form 3115 with your tax return.

The Impact of Deducting Previously Unclaimed Depreciation under Revenue Procedure 2004-11

A provider began her business in 2003, but did not claim depreciation on her furniture or appliances that she owned at that time. The fair market value of the property she owned in 2003 is listed below. Her Time-Space percentage from 2003 - 2009 was 40%. How much she would benefit by claiming this depreciation on Form 3115?

 

Value of property owned in 2003:
Washer	$ 150	Table/Chairs	$ 500
Dryer	150	Stuffed Chair	50
Freezer	50	Bed	200
Refrigerator	200	Stove	200
Sofa	400	Microwave	100
Total value: $2,000 x 40% T/S = $800 business basis

 

$800 x	$800 x	$800 x	$800 x	$800 x	$800 x	$800 x
14.29% =	24.49% =	17.49% =	12.49% =	8.93% =	8.92% =	8.93% =
$114.32	$195.92	$139.92	$99.92	$71.44	$71.36	$71.44
Total: 2003 - 2009:  $764.32

 

This provider can deduct $764.32 as previously unclaimed depreciation on her 2009 tax return. She must first file Form 3115 before filing her tax return. She can also claim a depreciation deduction on her 2009 tax return of $35.68 that represents the last year of depreciation.

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This handout was produced by Think Small (www.thinksmall.org).

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