Abandonment of Leasehold Improvements

[dsi]

Improvements were being depreciated over 39.5 years - MACRS. When they are abandoned because the client relocates, is the remaining depreciation wriiten off (forced) on the depreciation schedule? or, are they "sold" for $0 and the transaction then flows to Form 4797?

[erchess]

I think

I think they are forced on the depreciation schedule but I don't think I have ever done this and I would very much like to hear from someone else. NYEA, Bees, BB, Snags, anyone?

Change of Opinion - TTB doesn't specifically say how this is handled but there is a suggestion that one read about foreclosures and repossessions which are handled as sales. I therefore think abandonment would be handled the same way but I would still very much like to have confirmation from someone who has actually done these things.

[veritas]

I'm not one of those guys but

Put it on form 4797 with the remaining basis as a loss.

[erchess]

Sorry Veritas

I knew I would leave someone out who deserved mention which is why the list ended in "anyone". I certainly feel enlightened and I am sure original poster does as well and perhaps others.

[S T]

Leasehold Termination

DSI, you are posting regarding the lessee/tenant, correct?

from IRS's Pub 4681 has this to offer about abandonments of business-use property:


3. Abandonments

The abandonment of property is a disposition of property. You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else.

Loss from the abandonment of business or investment property is deductible as an ordinary loss, even if the property is a capital asset. The loss is the property's adjusted basis when abandoned. However, if the property is later foreclosed on or repossessed, gain or loss is figured as discussed earlier. The abandonment loss is deducted in the tax year in which the loss is sustained.

You cannot deduct any loss from abandonment of your home or other property held for personal use.

http://www.connerhubbard.com/june08.pdf This link might assist as well

Sandy

[dsi]

Thanks folks, I did flow it to the 4797 as an ordinary loss. Years ago I used to simply force the remaining depreciation, but as of 6-7 years ago I changed how I reported it. I have been flowing it to the 4797. However, for whatever reason I questioned myself the other day when I was working on a tax return. I feel better today, and I know the 4797 is the correct way to go with this.

[Snaggletooth]

Non-Synoptic Member

Remember those aptitude tests where they presented various shapes or colors and there would always be one figure that stood out as being grossly different from the others? Then the reader was supposed to circle this item or otherwise indicate in multiple-choice fashion?

Earlier, Mr. Erchess had the occasion to present such an array of brilliant tax preparers with one obvious member who didn't belong in the same breath as the others. Your chance to circle the item!

NYEA, Bees, BB, Snags, anyone?

Thank you Erchess. But I feel like a fish out of water!

Not that I don't have a few redeeming qualities - but simply being vociferous doesn't translate into having titanic tax expertise.