How do I get my Residential Rental Assets in service before 2018 to use a 30 year ADS Life in CCH® ProSystem fx® Fixed Assets?
- Article Type:
- How To
- Last Modified:
- 11/05/2022
Objectives
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Environment
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Procedure
Per the Federal Consolidated Appropriations Act of 2021, Residential Rental Assets used in a Real Property Sec 163(j)(7) electing trade or business should apply a 30-year life, regardless of date in service.
ProSystem fx Fixed Assets versions before 2020.01020 used a 40-year life.
When a file is opened on Fixed Assets version 2020.01020 or later, existing assets will be evaluated to determine if updates need to occur.
Impacted Assets are those that meet all the following conditions:
Amending Prior Year Returns
ProSystem fx Fixed Assets versions before 2020.01020 used a 40-year life.
When a file is opened on Fixed Assets version 2020.01020 or later, existing assets will be evaluated to determine if updates need to occur.
Impacted Assets are those that meet all the following conditions:
- Residential Rental Property Type
- Method of ADS or ADS Tables
- Life of 40
- Asset is linked to a Non-Farm Sec 163(j)(7) Electing business
- Amend prior year returns (Changes prior year lives and depreciation to reflect the new 30-year life)
- Adjust the current year and forward only (File a 3115 adjustment - leaves prior years lives and depreciation as they were filed, only adjusts the current and future years).
Amending Prior Year Returns
- Net Effects:
- The year of 163(j)(7) election and each year after will all reflect a 30-year life and calculate depreciation using the 30-year life.
- NO CAA Adjustments will be calculated. The "Depreciation-CAA Adjustment" column will not print, even if selected in report properties.
- How:
- Answer Yes to the message above.
- Click OK on the message instructing you to reverse to the year of the 163(j)(7) election.
- NOTE: No changes will happen until the year is reversed and unlocked!
- Reverse the year to the year of the 163(j)(7) election (for example 2018).
- Unlock the year of 163(j)(election (Tools>Lock Calculation, highlight the year and select Unlock.)
Once OK is clicked, residential rental property associated with Non-Farm entities that made the Sec 163(j)(7) election in the current, or future(s) being unlocked will update to a 30-year ADS life and recalculate current depreciation.
An entry will be made in the File History Log indicating this occurred.
When the year is closed, the new total depreciation should show as the prior year depreciation and the life should come forward as 30.
Adjusting the Current Year and Forward (3115)
An entry will be made in the File History Log indicating this occurred.
When the year is closed, the new total depreciation should show as the prior year depreciation and the life should come forward as 30.
Adjusting the Current Year and Forward (3115)
- Net Effects:
- Life Update - current and future year will update to use a 30-year life.
- Prior Depreciation in the current year will reset to the calculated depreciation using a 30-year life in the year of the election and after.
- Prior years will RETAIN the 40-year life, prior and current depreciation as it was when the year was locked - even if that year is later reversed to and unlocked.
- A CAA Adjustment will be calculated.
- The Adjustment will appear on the Detail tab in the CAA 2021 Adjustments row.
- The value in the CAA 2021 Adjustment row will print on the Depreciation Expense Report when the "Depreciation - CAA Adjustment" column is added in the report properties.
- How:
- Answer No to the message above.
- Answer Yes to the message above.
- The following will occur:
- Life will be Updated to 30 - Current and Future years only.
- Life for prior years will maintain the 40-year life (Even if that year is unlocked).
- Prior Depreciation in the Current year will update to the depreciation that would have been claimed if the 30-year life had been used instead of 40.
- Prior and Current Depreciation in the Prior years will remain as they were when locked.
- The difference in the prior depreciation claimed vs the recalculated prior depreciation will be available as a report column on the Depreciation Expense, Depreciation Variance and Net Book Value Reports. "Depreciation-CAA Adjustment" which will print as 'CAA Adj." on the report.
- This column is not on the reports by default.
- To see this value, you must add the 'Depreciation-CAA Adjustment' column to the report on the column selection tab of the report properties dialog.
- An existing column may need to be removed to allow an additional column to fit on the printed page.
- The Column will only print if the reporting period includes the current year of the file when the user selected No to amend and Yes to continue.
- This column is not on the reports by default.
- An entry will be made in the File History Log indicating this occurred.
- If No is clicked to the "Would you like to continue" message:
- A 3115 year has not been elected. The file will behave the same as if you had chosen Yes to Amend prior years.
- Any assets associated with entities that made the 163(j)(7) election in a prior year will NOT update.
- If No is clicked to the "Would you like to continue" message:
Notes:
- These messages will continue to be issued when a file is opened or when the year is closed as long as there are assets that should be updated.
- Import from Tax to FA: FA will bring in the Tax calculated 30-year difference as shown on Tax's new 4562 30 Yr Detail report. This value will print in the new CAA-Adj. column as described in the 3115 section below.
- Import from FA to Tax: On release 2020.02070 the FA CAA Adjustment will be imported and will print on Tax's 4562 '30 Yr Detail' report. For this report to show in the tax product, applicable entities will need to opt out on the BIE-2 entries (Form 8990 limitations for Business Int Exp under Sec. 163j under section Activities subject to Section 163(j) Item 23) in Axcess.
Additional Information
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Solution Id | 000232938/How-do-I-get-my-Residential-Rental-Assets-in-service-before-2018-to-use-a-30-year-ADS-Life-in-CCH-ProSystem-fx-Fixed-Assets |
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