Sometimes the IRS gives you a second chance.

That was the case in a private letter ruling the IRS issued to an unnamed partnership. But remember that private letter rulings cannot be cited as authority for anyone other than the taxpayer to whom it was issued.

When the partnership filed its original return, it elected not to deduct the 50-percent and 100-percent bonus depreciation deductions to which it was entitled. The tax professional charged with preparing the partnership return erroneously believed that one of the partner’s deductions would be limited by the passive activity rules. Under that limitation, the partner would not benefit from the enhanced depreciation deductions.

After filing two years of partnership returns on which the bonus depreciation was not claimed, the preparer discovered that the partner in question actually met the material participation standards with respect to the partnership. That partner would not be subject to the passive activity rules.

Finding that all partners would benefit from bonus depreciation, the partnership sought to amend its returns. In many cases, you can change a position you have taken on a filed tax return simply by filing an amended return within the next three years.

However, the tax law specifically provides that the election to claim or not to claim bonus depreciation can be changed only if the IRS consents to the change. In this case, the IRS granted its permission (PLR201230011).

While the situation worked out well for the partners involved, the IRS could have refused to allow the change.