Depreciated Property converted to Personal Use

[Rondi]

How should Section 1250 property be reported that has been depreciated (some fully under S179, some still has basis under MACRS), then the business goes OUT of business.

This was for a photographer (S/P), and the items were camera, computer monitor and lenses. They have not been sold, simply taken out of service, when the business closed down.

I have heard that it should just be reported as a Sale (F4797) with $0 sale proceeds. But that takes the remaining basis right to expense. Is that right?

Thanks for your help!

[BOB W]

Sale price if FMV........................

[Rondi]

Now THAT makes sense. Thanks, Bob!

[ddoshan]

If section 179 was used that turned out to be over and above what normal MACRS depreciation would have been allowed, I believe you would have depreciation recapture for the difference. Which, I believe, would be reported on Sch C. If regular normal MACRS was used I don't think you have to do anything special. The basis left would transfer to personal use.
I don't think the items mentioned are 1250 property. 1245 aren't they.

[Rondi]

Yes, you're right, ddoshan, My mistake it is Section 1245.
TP also bought a couple of camera lenses in the early part of 2012, thinking he was going to continue the business, before scrapping the whole thing later in the year.
How would I (should I) treat those lenses (basically placed in service, then removed from service) all in the same year?

[Gretel]

I agree with ddoshan. Only Sec. 179 might create income subject to SE as well. No depreciation allowed on items bought in 2012 and then taken out again in same year.

[Rondi]

Thanks Gretel for the confirmation. I had that in the back of my mind (no depreciation for assets placed in and out of service) the same year, but could not find anything to back me up.

[Rondi]

Wait....I'm confused about the assets bought before 2012 that was depreciated under Macrs:

The consensus between Gretal and ddoshan seems to be that I let the property "drop" from the Schedule C?.
i.e. no 2012 depreciation, no reporting on 4797 (or at most, report the "sale" price as the depreciated basis)? Is that correct?

Thank you for helping me understand this beast.

[ddoshan]

Property purchased prior to 2012 would continue to be depreciated until they are taken out of service.