I think your general understanding is correct. I.e., yes, the partial disposition rules may get you an addition loss deduction but if the passive loss limitation rules apply, you or your client may get no immediate benefit from the loss created by the partial disposition.

One other thing to keep in mind, though, is that when you do a partial disposition, you probably also remove accumulated depreciation from the property’s fixed assets schedule… so there should often be a reduction in the amount of recaptured depreciation or unrecaptured Sec. 1250 gain on the disposition of the property.

E.g., you have a $20K roof which has been “half” depreciated. If you dispose of the roof, you get to “Write off” the remaining $10K… (suspended probably) AND you also remove $10K of depreciation.

If you call our CPA firm offices and let us know where you’re located, we may be able to give you a name.

Thanks for your reply.

I was just going to fill out the forms myself…not use the software.
The problem is that all the tax people I have contacted are unaware of the new regs. I actually called the IRS and they have never heard of it. Seriously!
I was just wanting to make sure I used the correct forms.
Can you recommend someone I can call?

Thanks,
D. Matthews

You probably can’t do a partial disposition with consumer tax software… sorry. It’s the wrong tool for the job.

I’d think you either want to forgo the partial disposition treatment (thereby paying more tax in long run for sure)… or find a local practitioner who can handle the return for you.

So thankful I found this website. I am an individual and do my own taxes using H&R Block software. The software does not guide me on how to do a partial disposition.
I called several tax offices and nobody seems to know about the new regulations and/or what IRS forms to fill out to accomplish the task. I even called the IRS….not a clue.

I have one rent house with a basis of 70,982 that I bought in 2009
Depreciation 27.5 years, MM, S/L is $2581 per year
I had to replace the outdoor AC unit ($2,500) and line set ($995) in 2014.
I filed an extension and am currently trying to complete the 2014 taxes.
Can you provide a step by step on how to:

1- Retire the original AC as a disposition….. what Form? 4797?

2- Stop depreciating the original AC

3- Recognize a loss on the disposition

4 – Capitalize the new AC and line set

Somewhere it said I had to depreciate new AC for 27.5 years? Is that correct?
Most of the people I called said they just kept depreciating the old AC and depreciated the new AC for 10 years.

I just want to make sure what forms to use to do this.

Your help is greatly appreciated.

D. Matthews

I think you probably can. In fact, your situation sounds almost like a textbook example of when a late partial disposition treatment should occur.

I am working on a 2014 return for a fiscal year taxpayer (ended 9/30/15). They own a building that was placed in service in 1996. In 2009, the taxpayer replaced their roof and the old roof was not disposed of. Can a late partial disposition election/Form 3115 be done with the 2014 return to dispose of the roof? I want to make sure that the late partial disposition election applies to additions/disposals in 2009.

Thanks.

You report the disposition in the same way you would have in past reported it… And the gain or loss has whatever character it would have had in any “normal,” pre TPR situation. But you want to file the 3115 to show that you’re doing a late partial disposition.

Steve

I have been reporting the late filing partial disposition on all my Rental Real Estate clients on the Form 4797 as a 1231 Loss and also Filing the Form 3115. Is that not correct? Should this be an Ordinary Deduction instead?