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Estock (talk|edits) said:
| 22 April 2006
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| can the taxpayer fully write off any depreciation or amoritized expenses in the year of disposition?
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Estock (talk|edits) said:
| 22 April 2006
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| And this includes any start-up costs?
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Tess (talk|edits) said:
| 22 April 2006
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| Are you saying that in the year of disposition they take any depreciation that is left on the asset? I know why you abandon something you can take the depreciation that is left in that year, but i thought in disposition what is not taken yet is your basis left in that asset to offset against the selling price.
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Deback (talk|edits) said:
| 22 April 2006
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| The balance of depreciation never deducted is not deducted in the year of disposition. You would show the sale price on Form 4797 and then deduct the original cost and add the prior depreciation deducted when figuring the gain or loss. This would be the same for start-up costs, when reporting the sale of the actual business separately from the assets on Form 4797.
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Dennis (talk|edits) said:
| 22 April 2006
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| Depreciation and amortization expenses are taken for that portion of the year that the assets were in service. These expenses are then recaptured either in part or in full on disposition.
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Deback (talk|edits) said:
| 22 April 2006
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| That's true, Dennis. Usually, 1/2 year depreciation is deducted in the year of the sale on the Schedule where it belongs and then added to the prior depreciation on Form 4797.
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Estock (talk|edits) said:
| 22 April 2006
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| Thanks all! This goes back to my earlier question on the forum re: a client who made a movie in 2005 and is selling the rights in 2006 and whether he can deduct the start-ups in full against the one time income he will receive in 2006. Just wanted to be sure when making the start-up cost election that he wasn't required to continue the amoritization after the movie rights had been sold.
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Deback (talk|edits) said:
| 22 April 2006
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| I remember when you asked that movie question, but I didn't have time to answer it then. Yes, it would work the same way. The remainder of the start-up costs would be deducted from the sale of the rights in 2006.
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Estock (talk|edits) said:
| 22 April 2006
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| Deback - you are the best! I was worried when I read Sec 263A (I think that's it - I have it at work). Thanks so much and I am laying this to rest.
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