Section 179 Recapture S-Corp

[GTS1101]

S-corp dissolved 3/31/09. Had several assets with Section 179 expense that are being disposed of before the end of the recovery period. There will be depreciation recapture but I am unsure about how to report it. The assets are not being sold. The assets may be donated at a later time or just disposed of because of no value. A lot of it is old computer equipment that no one would want to buy because it is outdated. I thought I would report this on 4797 part 3 but it looks like that is only if business use drops below 50% use. It appears that this has to be reported on Schedule K-1 Line 17 as supplemental information for the shareholder so they can report on their own tax return. I use Pro Series and it has a Section 179 disposition report and if I put in the depreciation allowable under MACRS for the whole recovery period and then show the Section 179 claimed it shows this as a gain on Sch M-1. If I just show the Section 179 taken and the original cost basis the shareholder is not going to know what to report. Should I just create my own supplemental report to go with the Sch K-1. And where will the shareholder report? If there is no sales price and there is no FMV do they report on 4797 Pt 1 Pt 2 or Pt 4. Any guidance would be greatly appreciated.

Thanks!
GTS1101

[AuditorTurnedGood]

Just throwing this out there

but when the S-Corp dissolved, didn't business use go to 0%? If so, it would seem appropriate to put it in part 3 of 4797.

I'm interested in this answer as well; I have a client that started a new S-Corp mid way through the year and just treated it like a continuation of his old one. In reality, I have to do the final return for the old and the first year for the new, and I think I'll have depreciation recapture on the old one for sure. Not sure who advised him this was a good idea....not me.

ATG

[veritas]

the assets

are considered sold at fmv on 3-31-09. If a computer is worthless show it as a sale at zero sales price and throw it in the garbage.

[GTS1101]

What about the recapture of the 179

If the FMV is zero and the asset is scrapped don't you still have to recapture the excess depreciation taken on the sec 179? I would assume the shareholder will have to include the excess depreciation as the gain when reported on their own return to reflect the recapture of the section 179 even if the sale price is zero as there is no FMV.

GTS1101