The Internal Revenue Service has released new procedures to explain how a change in tax law last year could potentially affect rental apartment depreciation.
Revenue Procedure 2021-28 explains how a company can change its method of calculating depreciation to comply with the 2020 change in law to retrospectively allow a 30-year recovery period for certain types of rental housing that were put into service prior to 2018 to be provided under the alternative system of depreciation and held by a select real estate dealer or company. The law on the safety of taxpayers and their redevelopment, which was incorporated into the Budget Act in December last year, provides retrospectively a redevelopment period of 30 years according to the alternative depreciation system of the tax code for certain rental apartments.
The end-of-year package of funds approved by Congress last December included further tax breaks to deal with the economic consequences of the pandemic. The home rental sector was faced with the question of how to deal with the eviction moratorium and oversupply of available housing in some cities as residents fled to the suburbs.
The headquarters of the Internal Revenue Service in Washington, DC
Samuel Corum / Bloomberg
Along with this revenue process, the IRS on Thursday also released Revenue Process 2021-29, which allows an eligible partnership to submit an amended Form 1065 “US Return of Partnership Income” and a corresponding Appendix K-1 (Form 1065). , “Partner’s Income Share, Deductions, Credits, etc.”, to each of their partners as an alternative to filing an administrative adjustment request.
Section 1101 (c) of the 2015 Bipartisan Budget Act replaced the previous partnership procedures under the Tax Justice and Responsibility Act 1982 with a centralized partnership review system that generally sets, assesses and collects taxes at the partnership level. The centralized partnership review procedures apply to all partnerships unless the partnership chooses not to use these procedures. Partnerships that are subject to the central partnership audit system are referred to as BBA partnerships. You must provide a copy of Appendix K-1 to each partner and you must not change the information that must be provided to your partners after the return due date, unless expressly permitted by the Treasury Department. The Revenue Process exercises the power to allow a BBA partnership to submit an amended partnership statement and to submit amended Annexes K-1 in the circumstances described in the guidelines.