Sale of Depreciated Asset Question

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  • JG EA
    Senior Member
    • Jul 2005
    • 2176

    #1

    Sale of Depreciated Asset Question

    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?
    JG
  • Gretel
    Senior Member
    • Jun 2005
    • 4008

    #2
    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.

    Comment

    • JG EA
      Senior Member
      • Jul 2005
      • 2176

      #3
      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.
      JG

      Comment

      • Snaggletooth
        Senior Member
        • Jun 2005
        • 3314

        #4
        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.

        Comment

        • JG EA
          Senior Member
          • Jul 2005
          • 2176

          #5
          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.
          JG

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