Form 3115 - Missed Depreciation Page 4
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An adjustment in the useful life of an asset for which depreciation is determined under
§167.
A change in the use of an asset in the hands of the same taxpayer.
Making a late depreciation election or revoking a timely valid depreciation election
(including the election not to claim bonus depreciation). If the taxpayer elected not to
claim bonus depreciation, a change from not claiming to claiming bonus depreciation is a
revocation of the election and is not an accounting method change. In general, to make
a late depreciation election or revoke a depreciation election, the taxpayer must get IRS
approval by requesting a letter ruling.
Any change in the placed-in-service date of a depreciable asset.
Filing an Amended Return
Taxpayers can file an amended return to correct the amount of depreciation claimed if:
They do not have a change in method of accounting.
They did not adopt a method of accounting for property placed in service in tax years
ending after December 29, 2003.
They claimed the incorrect amount on property placed in service in tax years ending
before December 30, 2003.
A taxpayer who has used an impermissible method of depreciation for only one tax year has
not adopted a method of accounting. The taxpayer can file an amended tax return for the year
the property was placed in service if the amended return is filed before the taxpayer files a tax
return for the succeeding year. Otherwise, the taxpayer must file Form 3115, Application for
Change in Accounting Method, for the year of change.
On January 28, 2004, the IRS issued Chief Counsel Notice 2004-007 announcing that, for
depreciable or amortizable property placed in service by the taxpayer in taxable years ending
before December 30, 2003, they will not assert that a change in computing depreciation under
§§167, 168, 197, 1400I, 1400L(b), 1400L(c), or former §168 for depreciable or amortizable
property that is treated as a capital asset under the taxpayer’s present and proposed methods
of accounting is a change in the method of accounting under §446(e). This means that a
taxpayer can take the position that a change in computing depreciation is not a change in
accounting, and he or she can file amended returns to change the accounting for depreciation
or amortization.
On July 12, 2004, the IRS issued Chief Counsel Notice 2004-024 to clarify the application of
Chief Counsel Notice 2004-007. Key provisions of Chief Counsel Notice 2004-024 include:
If the taxpayer files amended returns to implement the change in depreciation or
amortization, no §481(a) adjustment is required or permitted.
If the taxpayer is only making a depreciation or amortization change to one asset, the
taxpayer cannot file amended returns for some tax years and Form 3115 for other tax
years. However, if a taxpayer is making changes to two or more assets, the taxpayer
can file amended returns for some assets and file Form 3115 for different assets.
NATP
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P.O. Box 8002
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Appleton, Wisconsin 54912
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800.558.3402
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