Depreciation after increase in biz use

[Gretel]

Another depreciation issue: Asset was used 25% for biz for some years and 8 year depreciation ran out in 2010. Now, in 2012, asset is used 50% for, which leaves 25% of depreciation unclaimed. Is it a change in accounting methods if I catch up for that year? Is client out of luck and this will be accounted for when asset is sold (if asset is sold)?

[Burke]

I don't think so. I would put it into use @50% effective this year, then list all the prior depreciation taken to account for it so that it is not taken again.

[Gretel]

Thanks, Burke, this is what I did. Let's look at numbers to eliminate misunderstandings.

Asset, 7yr, bought for 2,000 - 25% = 500 depreciation (total for 8 years)

Year 10 biz - 50% = 1,000 total depreciation but since this is beyond 8 years, what do I do with 500 not claimed (and not allowable, either because of lower biz use or because or "time is up")?

It's easy enough to overwrite depreciation in software but I am not sure I am allowed to claim this depreciation.

[taxea]

I too don't know whether the IRS would accept this but if client agrees it is worth trying I would subtract the prior depreciation or 25% of the basis (whichever is higher) from the basis and set up new depreciation for a used asset at 50% of the new basis. Since the old basis/asset is already zeroed out you can take it out of service and put it back in as the used asset.

[Burke]

Thanks, Burke, this is what I did. Let's look at numbers to eliminate misunderstandings.

Asset, 7yr, bought for 2,000 - 25% = 500 depreciation (total for 8 years)

Year 10 biz - 50% = 1,000 total depreciation but since this is beyond 8 years, what do I do with 500 not claimed (and not allowable, either because of lower biz use or because or "time is up")?

It's easy enough to overwrite depreciation in software but I am not sure I am allowed to claim this depreciation.

Not exactly following this.

Asset is placed in service in 2013 @ 50% of $2,000 orig cost. Depreciable basis = $1,000. Depreciation calculated as 7-yr asset. Prior depr of $500 is entered as already taken as it was claimed, was it not? So, remaining basis is $1,000 less $500, less this year's depreciation. If I am reading taxea's post correctly, you could also just subtract $500 from the $1,000 and start with $500 basis in 2013, over 7 yrs.

[Gretel]

That is an interesting idea, reasoning being that 25% of asset is now converted from personal to biz use, right? I think just showing 25% ($500) as new asset will keep things clearer and good notes of what happened. Thanks.