Working on late return

[JG EA]

Could someone help me though this?

Sch C: Do you adjust the basis in the wrecked business vehicle on Form 4684 line 26? Or do you just use the cost, etc. minus depreciaton on that line?

When it says in Pub 547 to decrease the basis by the amount of the insurance proceeds and increase the basis by the restoration costs does this means after you've filled out Form 4684?

This TP has two incidents. One is even the way I've done it with cost minus depreciation on line 26.
The other one results in a gain:
Line 26 $3000
Line 27 $9000
Didn't fix and keeping it for parts
Line 28 $6000 gain.
If this is correct do I afterwards do anything about the basis?

Or is it Line26 $0
Line 27 $9000
Line 28 $9000

I'm confused right now.

[S T]

I'll try

Not sure this will assist,

You are on Section B - Business Income Producing Property

Starting with Line 26

Line 26 - Cost or adjusted basis usually means original cost plus improvements, minus
depreciation allowed or allowable (including any section 179 expense deduction),
amortization, depletion, etc. . does not refer to adjustment of Cost by Insurance Reimbursement sp 3,000 (adjusted basis)

Line 27 is the insurance reimbursement 9,000 (insurance payment)

Line 28 - is the gain or loss which is 6,000 If Line 27 is more than line 26, enter on line 35 or 40, etc. and will flow through to form 4797

I don't think you have to complete these lines.
Line 29 is the FMV before wouldn't that be 9,000 based on insurance reimbursement
Line 30 is FMV after (guessing since he didn't repair) would this amount be 3,000 or less?

Based on your OP, It appears that the client has a $6,000 gain

Sandy

[JG EA]

Not sure this will assist,

You are on Section B - Business Income Producing Property

Starting with Line 26

Line 26 - Cost or adjusted basis usually means original cost plus improvements, minus
depreciation allowed or allowable (including any section 179 expense deduction),
amortization, depletion, etc. . does not refer to adjustment of Cost by Insurance Reimbursement sp 3,000 (adjusted basis)

Line 27 is the insurance reimbursement 9,000 (insurance payment)

Line 28 - is the gain or loss which is 6,000 If Line 27 is more than line 26, enter on line 35 or 40, etc. and will flow through to form 4797

I don't think you have to complete these lines.
Line 29 is the FMV before wouldn't that be 9,000 based on insurance reimbursement
Line 30 is FMV after (guessing since he didn't repair) would this amount be 3,000 or less?

Based on your OP, It appears that the client has a $6,000 gain

Sandy

OK that helps me. Now,

For the first vehicle that came out even - Now what exactly does it mean to increase and reduce the basis by the proceeds and repairs? Ideally this would mean no change because the insurance would exactly match what the restoration costs, but at what point do you do this? You don't change depreciable basis do you?

On the second vehicle the one that came out a $6000 gain. - the gain doesn't change the basis of the vehicle that they are saving for parts does it to $3000 minus $9000 = $0 + $6000? Or is it Zero basis because they didn't do any repairs. Or is it still $3000 to finish depreciating?

Stupid questions but ......there they are.

[S T]

Parts

On the second vehicle you say that the t/p is not going to repair, but only retain for parts. You have a $6,000 gain that you are reporting. So I guess the question is whether or not the vehicle is still going to be a business use vehicle that would be subject to depreciation?

Interesting scenario

Sandy

[erchess]

Personally

If the client wrecks a business use vehicle and keeps it for parts or any other purpose I would keep on depreciating it even if the parts were for use in a one hundred percent personal use application of some kind. I stop depreciating a business use listed property asset when business use drops below 50% without total use dropping to none, or when the asset is depreciated out or when the taxpayer no longer owns the asset. I can't think of any other scenario in which I have stopped depreciation.

[JG EA]

Thanks for your help ST and Erchess.
Of course Line 26 is as you said ST and the basis (minus depreciation) before the incident.
Then you enter the insurance reimbursement to see if there is a gain or loss.

I was still having trouble with:

Adjustments to Basis

If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. The result is your adjusted basis in the property.

You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition.

I couldn't figure out at what point do you do this?

I think I found the answer. In 946 - the depreciation pub it says

If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. For the year of the adjustment and the remaining recovery period you must figure the depreciation yourself using the property's adjusted basis at the end of the year.

It then tells you how to do this on pgs 49 - 53.
It says also on page 53 to use because of the adjustments to basis

You cannot use the table percentages to figure your depreciation for this property for this year because of the adjustments to basis. You must figure the deduction yourself.

Next question: It looks as if this means you use Declining Balance, etc and start your 7 years (or 5 etc.) over again?
____________________

And the answer to that is yes. I found it today working on the return. You do have to take into consideration MQ Convension, but otherwise, just start over with year 1.
By the way in using the old DB I really like it. It is more math-like.