Second opinion please.

[Ranger]

I am amending 2010 and 2011 returns for some major deductions that were missed by previous preparer. Now I discover this.

Taxpayer is a farmer. He slit off his personal residence in 2010 and sold the rest of the farm. Along with the house he kept a shop which was built in 2010. The preparer wrote off the entire shop in 2010 using bonus depreciation.

In 2011, the house site was sold along with the shop. The sale was not reported on the 2011 tax return. It looks obvious that the sale of the shop should have been reported on form 4797, but I like to get a second opinion before I amend another preparers work.

[Guest Taxed]

Is the previous tax preparer still in business?

This is a mess and will cost your client some serious tax and under payment penalties.

When you say he wrote off the entire shop, you mean building and land as well or just machinery?

[Ranger]

Preparer is still in business. The additional tax will be about $4,000 plus i & p. The write off was legit, MACRS with a life of 20 years or less using bonus depr. (farm building)

My original thought was to elect out of bonus for 2010 but it appears to be too late.

There were some missed deductions in 2010 that will far outweigh the extra tax in 2011. He was in a higher tax bracket in 2010 and also had amt.