Taxpayers failed to file a decade or so worth of US tax returns. During this non-filing period, they rented out their (non-US) property for about 5 years.
A couple of years ago, they filed a simple filing under the Streamlined Offshore Procedures.
In 2022, they sold the property, and now face the 1231 gains (am I saying that correctly? Most peeps call this depreciation recapture, but I don't like that term for this).
The taxpayer does not understand and is not happy with the result, of course.
Australia, it seems at least according to their Aussie tax preparer, will provide an exclusion that forgives them of everything (they moved back into the property). Sounds like a generous exclusion to exclude the equivalent of 1231 gains.
The property has not been rented out for several years now.
Can form 3115 be used to take this depreciation that was missed on these non-filed US tax returns somehow in 2022?
Was SOP a mistake and should they have filed 10 years of tax returns to claim the depreciation? There probably would not have been any tax due due to the FTC, but there may have been PALs.