Removing fully depreciated assets from corporate books?

[tacks]

How is it that we report this again?

Corporate client discards old fixed assets and receives no salvage value. How do i show this on the corporate return? I don't show this on the 4797 do i? The 4797 is only for when you sell fixed assets, right?

I was taught that change in the fixed asset balances on schedule L should coincide with assets added (4562) and assets sold off (4797). Was i taught correctly?


Or is it OK for me to just removed fixed assets from the schedule L without showing it anywhere else?


(normally i would just leave the old assets on there and be done with it but these fixed assets were added by the prior accounant and they just do not smell good. Even the client thinks it's very odd!!!)

Once again i thank all of you for helping me, as you've done several times. Again i wish you all lived close together so i could buy beers for all of you. Great forum, IMO.

[S T]

Prior Post

Maybe this prior post will assist you http://www.thetaxbook.com/forums/sho...ht=disposition

I show on 4797 and then on the Accounting record as disposition no gain/no loss.

Sandy

[tacks]

Wow! That's a great thread, Sandy! It's got great information and it's got Old Jack, no less. (He's a personal favorite of mine.)

Now I'd would prefer to offer a pint of Philadelphia Brewing Co's 'Love Stout' poured from a fresh keg right inside the gate of the brewery itself. But if it's Yuengling you prefer so that's what i'll owe to you. After all, you are the one here who's doing a favor for me.

[taxea]

If the assets are fully depreciated just put the date disposed of on the asset form. If not fully depreciated put the date and 0 for the sales price. The information will transfer to other necessary forms and if any other entries are needed they are done on the other forms

[Snaggletooth]

No Reconciliation

Tacks, the 4797 should not be a depository for all disposed assets.

GAAP teaches that original values and accumulated depreciation should be written off against each other with no gain/loss when assets become fully depreciated. I disagree because once this is done, then there is no accountability for assets on the books. But if the client chooses to follow GAAP, then there is no disposition, and hence no 4797.

Another situation is a Forklift, original cost $12,000, accumulated depreciation $8,000. Gets traded in on a new $18,000 Forklift, and gets a $7500 trade-in value. Basis of new forklift is $10,500 cash, plus $4,000 book value of trade-in, or $14,500. The asset records are in upheaval, but none of this transaction goes on a 4797.

Then there is the $20,000 Truck, with $15,000 depreciation taken. Owner gives truck to his son. No 4797.

A list of asset dispositions is always a good guide to determine 4797 items, but never attempt to reconcile.

[S T]

But

Snags, based on your example, we as tax professionals,

Another situation is a Forklift, original cost $12,000, accumulated depreciation $8,000. Gets traded in on a new $18,000 Forklift, and gets a $7500 trade-in value. Basis of new forklift is $10,500 cash, plus $4,000 book value of trade-in, or $14,500. The asset records are in upheaval, but none of this transaction goes on a 4797.

Shouldn't then we be completing the "Like Kind" Exchange form 8824 for trade in property? And then also make the proper reflections in the Accounting Records?

Sandy

[ChEAr$]

First of all, all assets still owned by a company remain on the books, even if book value
is zero, i.e. accumulated deprecation equals cost.

Only when an asset is disposed of do you remove both figures from the accounts.
Remember that local jurisdictions sometimes audit for personal property taxes and want
to see a list of all property owned, because even if depreciated for GAAP and taxes,
they still assess a minimum tax; for example 30% of cost in Columbus, GA.

As for tax purposes, if fully depreciated and disposed of, whether thrown away, given away,
chopped up, or thrown in the river, there is no need to report anything on a form 4797.

On the balance sheet of page four for entities the two accounts, cost and accumulated
will have been reduced just as for accounting purposes.

whew.