Amended 1120-S Question

Technical topics regarding tax preparation.
#1
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If an S-Corp return elects out of bonus depreciation on a 2020 tax return due to not needing the depreciation based on an operating loss and comes to find out later that there was an overstament with their COGS and need to amend, can they drop that election on the amended return so that they can take bonus?


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#2
TrueTax  
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If the amended return is filed within 6 months of the due date of the original return (including extensions) then yes. Otherwise it would require a private letter ruling. I am including the regulation below:

1.168(k)-1(e)(7) Revocation of election.

1.168(k)-1(e)(7)(i) In general. Except as provided in paragraph (e)(7)(ii) of this section, an election specified in paragraph (e)(1) of this section, once made, may be revoked only with the written consent of the Commissioner of Internal Revenue. To seek the Commissioner's consent, the taxpayer must submit a request for a letter ruling.

1.168(k)-1(e)(7)(ii) Automatic 6-month extension. If a taxpayer made an election specified in paragraph (e)(1) of this section for a class of property, an automatic extension of 6 months from the due date of the taxpayer's Federal tax return (excluding extensions) for the placed-in-service year of the class of property is granted to revoke that election, provided the taxpayer timely filed the taxpayer's Federal tax return for the placed-in-service year of the class of property and, within this 6-month extension period, the taxpayer (and all taxpayers whose tax liability would be affected by the election) files an amended Federal tax return for the placed-in-service year of the class of property in a manner that is consistent with the revocation of the election.
 

#3
HowardS  
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Rev Proc 2020-25?
Taxpayers are also allowed to make a late election to opt out of bonus depreciation, make a late election to use ADS, or revoke an election out of bonus depreciation by filing an amended return, amended Form 1065 or AAR for the year the property was placed in Alternatively, taxpayers can forego amending returns (or filing an AAR) by filing an automatic method change #245 for the first or second taxable year after the taxable year in which the taxpayer placed the property in service, or, if later, the taxable year for which the taxpayer timely files an original federal income tax return on or after April 17, 2020, and on or before October 15, 2021. Importantly, these late elections and revocation are not limited to QIP only.


(REV PROC 2020-50 expands 2020-25)
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#4
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So as it appears the general rule is that you have to amend within six months of the original due date of the tax return but the CARES act is acting in my favor here because of Rev. Proc. 2020-25.
 

#5
HowardS  
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Correct.
Retired, no salvage value.
 

#6
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HowardS wrote:Correct.


Can I buy a man lunch here? You definitely made my life a lot easier today!
 


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