Discussion:Asset bought & sold in same year
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Discussion Forum Index --> Basic Tax Questions --> Asset bought & sold in same year
Discussion Forum Index --> Tax Questions --> Asset bought & sold in same year
| 26 June 2008 | |
| Client purchased Truck in January and sold (repossessed) in October. No depreciation allowed, but can loss be taken on Sch. C rather than 4797 to reduce S/E tax? Loss was approximately what the depreciation for 1/2 year would have been. | |
| 26 June 2008 | |
| the answer is 'no', but have you considered taking a standard mileage rate for the use of the truck instead of actual expenses? | |
Southparkcpa (talk|edits) said: | 27 June 2008 |
| I believe you MUST take 1/2 year depreciation (MACRS) and recognize a gain/loss on repossession. You will most likely get a 1099C for the foregiveness of debt as well if I read your post correctly. In no case can this be correct on a schedule C. This is a 4797 transaction, the gross proceeds for 4797 will be the TOTAL balance of the loan, cost is basis less depreciation. When the 1099C comes in you should have NO income if you handle the 4797 correctly and pick up total income in the amount of the loan NOT just what the bank received in sale. | |
| 27 June 2008 | |
| SouthparkCPA, I believe the only asset allowed depreciation in a year bought & sold is real estate. Where do you get MUST?? | |
Southparkcpa (talk|edits) said: | 27 June 2008 |
| I did say "Believe" but if a depreciable asset is placed in service , does a taxpayer have a right to NOT depreciate it? I did see some cites surrounding involuntary conversions but nothing that stated you do NOT have to take depreciation. Small point as it would be recaptured but your point is well taken. I have never seen a truck purchased, put in service and not depreciated.
Regs. ยง1.168(i)-6(f)(3) deal with this issue a bit but MUST may not be correct. What is your thought here? | |
| 28 June 2008 | |
| Although depreciation may have initially been taken on a truck,or for that matter any other tangible property, if the truck is purchased and disposed of during the same year no depreciation is allowed. You in effect go back and reverse the depreciation initially taken . Tax Code 168(d)(B)(ii) . This is not an every day occurance but happens in cases of accidents ,repossessions etc. | |
| 30 June 2008 | |
| I should have been more specific initially: The "Truck" is a tractor unit (18 wheeler) with a cost of $90,000, so standard mileage rate is not appropriate.
There is no COD because the truck was sold for the loan balance. Kevinh: minimal profile added. | |
RoyDaleOne (talk|edits) said: | 30 June 2008 |
| Pub 946....
EXCEPTED PROPERTY Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. * Property placed in service and disposed of in the same year.
(Determining when property is placed in service is explained later.)
Regs. Sec. 1.168(d)-1T | |
| 30 June 2008 | |
| He can take his actual expenses (less his payments of course), or the mileage method less the depreciation component. Either would help a little to reduce SE. P.S. I wonder how many people would back depreciation out of the mileage method (cough)???? | |
| 30 June 2008 | |
| Ahh, dam*. Well, I require my clients to lease everything anyway, or I won't do business with them. | |
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