Foreign Assets Placed in Service Before 2010 (or Before 2011 if You Filed Your 2011 Return)
Taxpayers who have rental properties or businesses in foreign countries have a different way to depreciate those associated assets than the methods for US properties.
Assets located in the U.S. may use accelerated methods of depreciation, whereas assets located outside the U.S. must use a slower Alternative Depreciation System (ADS).
Certain customers, who purchased and placed assets into service for rental properties or businesses in a foreign country in a year before 2011, may have filed an incorrect tax return.
TurboTax has fixed this issue.
How to tell if you may be impacted
You may be affected if ALL of the following are true:
- You filed a 2011 Federal Income Tax Return prior to April 26, 2012; AND
- You previously used TurboTax to file a 2010 federal tax return with Schedule E rental property or a business; AND
- You transferred your 2010 federal tax return information to your 2011 return; AND
- You had rental or business property you owned outside of the United States; AND
- You entered an asset for that property that was placed in service in a year before 2011.
If you are affected, you may have underpaid your taxes. You may need to file a Form 3115 to change your depreciation method and if your state return is affected, you may also need to amend your state tax return.
Instructions
Use the examples in the following steps to assist in filing your change in depreciation method to the ADS method for foreign assets.
- Complete Form 3115 to change your accounting method.
- On the form, indicate that you are changing your depreciation method to the ADS method.
- Click here to view an example of a completed Form 3115.
- Attach an explanation statement to your Form 3115, and refer to the statement on your form (see the completed Form 3115 example above).
Click here to see how we calculated the depreciation amounts on the explanation attachment (Statement 3). Do not file this calculation reference with your form.
