The 23 K loss wiped out any taxes I would have paid for the year, so my withheld tax is all coming back home.
Not good for uncle sam…..this is being repeated thousands of times.

I sold my rental in 2010
I rented it out Oct. 2008 …for a total of 3 months
I rented it all of 2009
I rented it out till April 7th of 2010….a total in this year of a little over 3 months.
I never depreciated…IRS says I have to put a deprecation number in column E , form 4797—to add to my basis…..dumb me never thought depreciation was mandatory.

So…can I fill out form 3115 and just catch up on the total for the required amt.? …to put on my form 4797….column E? I do not want to go back 2 years and redo a form 1040X
I of course took a 23k loss in this terrible market just to get out of the collapse in my area.
And, damn lucky to find any buyer.

I know, why not. Let’s not ask that.

I actually have one more comment for you.

With regard to the ratio between the building/improvments (depreciable) and land (not depreciable) I’ve found the following information:

From the IRS Real Property Valuation Guidelines manual (www.irs.ustreas.gov/irm/part4/ch42s06.html), under section 4.48.6.2.4 sub-section (3) approach to value “The valuator should consider the appropriate valuation approaches, such as the market approach, the income approach and the cost approach. Professional judgment should be used to select the approach(es) ultimately used and the method(s) within such approach(es) that best indicate the value of the property.“ So, that sounds like we can use any reasonable method to determine the valuation, and since it doesn’t say we have to determine the improvements first or land first, we get to choose.

In that IRS manual there is a detailed description of the three methods as follows:
1. In the Market or Sales Comparison Approach, properties similar to the subject properties sold close to the valuation date are compared to the subject property. Adjustments are made for financing, condition of sale, date of sale, physical characteristics and location to indicate the value of the subject. Care should be taken to consider the number of sales available, their relative comparability, the degree and rationale for adjustments to the sales and the relative correlation and reliability of the value indications from the sales.
2. In the Cost Approach, an estimated reproduction or replacement cost of the improvements is computed and then reduced for physical, economic and functional depreciation. This value should be computed as of the date of valuation. To this result, an amount is added for the value of the underlying land. This approach is generally useful for specialty properties where other approaches lack sufficient supporting data and where land value and depreciation amounts are reasonably determinable.
3. In the Income Approach, an income stream is projected based on analysis of historical financial income and expense statements, vacancy rates, rent rolls and terms of existing leases. Value is derived by converting net income/cash flow projections to present value using an applicable capitalization technique reflective of typical investors for the type of property in question. Care should be taken to justify and support projections of income and expenses including any unusual or non-recurring items. Adjustments to income and expense data should be made as necessary to reflect the appropriate income streams consistent with the valuation methodology selected. All discount/capitalization rates should be justified with reliable market data, industry surveys or market supported technical methodology and computations.

And, the Every Landlord’s Tax Deduction Guide says:
“…However, improvement ratios determined from a property tax assessment often do not reflect reality. County tax assessors aren’t greatly concerned about arriving at an accurate breakdown of the relative values of your land and improvements. This is because it has no effect on your property tax bill – your tax is based on the total assess value of your property. Often, county assessors apply a standard percentage to all property in the area…As a general rule, tax assessor improvement ratios are on the low side.…”

And, IRS publication 527 Residential Rental Property says:
Depreciation “Land and buildings. If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the FMV of the whole property at the time you buy it.” It goes on to say “If you are not certain of the FMV of the land and the buildings, you can (doesn’t say you must) divide the cost between them based on their assessed values for real estate tax purposes.”
—
Based on that, I’ve researched into raw land of simular size to our 7 brand new homes in MS and AL and have improved the ratio from the questionable standard of 15-20% to a more appropriate 3%. YMMV.

If you have questions beyond what I specified above, let me know.