Discussion:Depreciation Recapture - Hummer
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Discussion Forum Index --> Tax Questions --> Depreciation Recapture - Hummer
| 20 January 2007 | |
| My client, an S corp, has a hummer which was puchased through the business in 2003. The vehicle was sold late 2006. What is the best why to handle depreciation recapture? | |
| 20 January 2007 | |
| Blackwel: according Code Sec 1254, Sec 179 depreciated property is subject to recapture. | |
| 20 January 2007 | |
| Blackwel: I don't understand your comment. Kevin: Yes, I am familiar with the form. It's been a very long time though. | |
| January 20, 2007 | |
| DML - Your software should handle this with no problem and will automatically enter the sale on Form 4797 from the asset entry worksheet, after you fill in the disposition date and amount of sale price, providing you have an asset entry worksheet for the Hummer and the Sec 179 amount has been entered on that worksheet. | |
| January 20, 2007 | |
| When you drop below 50% tho', it's not a sale, rather a 280F calc as I recall, which ends up at the bottom of 4797 p. 2... | |
Death&Taxes (talk|edits) said: | 20 January 2007 |
| Right, JR. Lots of clients tell me their use went below 50%, and Santa is coming too. One silly question though. Even though it was probably depreciated at 100% usage, what happens to the personal use shareholder accounted for in some manner. Be gentle with me, remember I have no clients with cars in their S corps. | |
| January 20, 2007 | |
| As I recall, the depreciation is recomputed at straight line at the new percentage, and the newly allowed amount is offset against what was taken, and the difference is the 280F amount added back to income. Grace for faulty memory here if it's not quite right. | |
Death&Taxes (talk|edits) said: | 20 January 2007 |
| Next to health insurance for S shareholders, accounting for auto in the corporation must be the second most popular issue so I was curious. | |
| 20 January 2007 | |
| I hate to sound stupid but when you are referring to 179 recapture are you referring to section IV of 4797 or are you simply referring to depreciation recapture to section III? | |
| 20 January 2007 | |
| I am referring to recapture for an automobile previously depreciated under section 179. I would use Form 4797 to report the sale of the asset. | |
| 20 January 2007 | |
| In part III but also in part IV for less than 50% and then to Sch C? | |
| January 20, 2007 | |
| Ok, I just opened my tax return and sold one of the assets I had previously expensed under Sec 179. The original cost was $2,215 and the Sec 179 expense was $2,215. I sold it for $3,000. Form 4797 shows an ordinary gain of $2,215 that transfers to Form 1040, line 14. The remaining $785 transfers to Sch D as a capital gain. If you need all the line numbers on Form 4797 and Sch D, let me know. | |
| 20 January 2007 | |
| OK I agree - so what I was asking was if there was separate 179 recapture directly to the Sch C subject to SE. Thanks | |
| 20 January 2007 | |
Blackwel:
I don't know why you insist on less than 50%. This is not the case in this senerio. Also, the Hummer was owned by an S-Corp so Schedule C has not place in the equation. | |
| January 20, 2007 | |
| No, Sec 179 recaptures never transfer to Sch C and are not subject to SE tax. | |
| January 20, 2007 | |
| I think Blackwel forgot the original question after Kevin, for some reason, added something about 50% use to your original question. | |
| 20 January 2007 | |
| If I sell an asset I took a 179 on in a prior is part of the 179 recaptured in part IV of 4797 and taxed on Sch C? I realize the sale goes in part III - the question is on part IV or is part IV only used when use drops below 50% but you still have it? | |
Death&Taxes (talk|edits) said: | 20 January 2007 |
| I hope I shed light and not confusion: If use drops below 50% and 179 Expense is recaptured on Part IV, the Proseries instructions tell us to carry the difference between the 179 expense and the recomputed depreciation to the Schedule where we deducted the original 179, including Schedule C.
| |
| 20 January 2007 | |
| I apologize I see that I got WAY off topic. Sorry. Do I add same 179 recapture to Sch C if I SELL that asset? | |
| January 20, 2007 | |
| Blackwel - I answered your last question awhile ago. The answer is no. | |
| January 20, 2007 | |
| Blackwel - I'm not considering less than 100% usage in my last two answers to you. | |
| 20 January 2007 | |
| I could buy a big screen TV for my office in 2004 for $2000 and take 179 and reduce both my fed and se tax. I sell it in 2006 and only pay fed tax on recapture. What am I missing? | |
| 20 January 2007 | |
| You know you read this stuff and you see something applicable to some of your clients that makes you feel like you have done it all wrong forever. Your blood pressure rises immediately that you could be so stupid only to find out eventually IF you can figure out what everybody says that you did it right to begin with. I guess it's all in terminology and patience. It would however help if I stayed on the topic. Thanks! | |
Death&Taxes (talk|edits) said: | 20 January 2007 |
| Big screen TV, huh? Only used to watch Tax Talk Today, I bet, or maybe Wesley Snipes films....you know, prospecting for clients.
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| 20 January 2007 | |
| I said I COULD, didn't say I would - it was just a what-if. | |
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