Sale of Depreciated Asset Question

[JG EA]

I have a client that was a Sch C but no longer.

He had a piece of equipment that was 7 year property. The 8 years for the depreciation ran out long ago.

It was not fully depreciated and the first schedule I have was in the 5th year. It was depreciated correctly on all the rest until the time ran out.

I am assuming that the reason it wasn't depreciated fully was that the business use percentage was less than 100 in some years.

Now it is being sold. Am I OK in using this basis on this sale?

[Gretel]

If this is the only information you have then I would use the basis shown. The only thing this basis should be used for is for his personal portion of the sales. Business % basis should be zero.

[JG EA]

Now that's something I hadn't considered. So I should take the depreciation taken vs. total basis and figure out the business % from that and then report 2 sales (or just one if the personal % is a loss.)

Thanks so much. This makes sense. I was just going to report the whole thing on 4797.

[Snaggletooth]

Differ

There could be any number of reasons why the item is not fully depreciated - ranging from stoppage of use to pure human error. If the asset was not depreciated in a particular year, but was "depreciable" (another discussion), then the effect on a 4797 would be the same as if it had been depreciated. I would not assume anything, unless the client can help you determine what happened.

After making a good faith effort to find out, if you have no information to the contrary, I would simply sell the thing and use the remaining undepreciated value as adjusted basis for the sale.

[JG EA]

All good ideas. I think I like the assuming business % differed, but you are right - I should ask the client whether it is possible it was less than 100%. Your last thought is what I did first and then worried about it.