Have a new client that had a business with a depreciated an asset in 2004. Tax preparer used the 50% additional depreciation. Client lives in California and California did not adhere to the federal's additional depreciation; thus an adjustment should be made to the state return adding the extra depreciation back in. However, tax preparer did not add extra depreciation back into state, thus taking too large a depreciation deduction. My question is what depreciation basis should I work with:
Asset - $1,920 less 50% of $960 leaves a depreciation basis of $960 less reg. dep. of $192 for 2004.
CA's basis should be $1,920 less $192 for 2004.
In doing the 2005 return, should I use the incorrect basis set up by previous tax preparer of $960 or use the correct basis of $1,920. If I use the correct basis and client does not file an amended state return; he will then have an larger overall basis when fully depreciated - $1920 & the $960.
Which way to go????
Please help!!!!!
Asset - $1,920 less 50% of $960 leaves a depreciation basis of $960 less reg. dep. of $192 for 2004.
CA's basis should be $1,920 less $192 for 2004.
In doing the 2005 return, should I use the incorrect basis set up by previous tax preparer of $960 or use the correct basis of $1,920. If I use the correct basis and client does not file an amended state return; he will then have an larger overall basis when fully depreciated - $1920 & the $960.
Which way to go????
Please help!!!!!
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