Margaret CPA in OH Posted February 12, 2014 Report Share Posted February 12, 2014 Client had good consulting business until early last year. He had legit home office. By May he could no longer pay mortgages so moved in with friend in another state. House will probably go through foreclosure this year.He had business income through early months in first state and home office. After move, he had just $2000 in se income using all business equipment (computer, printer, etc.) in friend's home. Do I just dispose of home office and not equipment? He is still trying to get more business although he has taken a position meanwhile. Normally mid year disposition means no deduction except this is real estate. The house hasn't been sold so how to recapture depn? Is this considered abandonment? Does he still have legit business expenses in friend's home since he doesn't technically have a qualified home office? Other assets were Sec. 179.When originally set up, data did not have to be entered on Fixed Assets so doesn't appear there. Where do I indicate abandonment or whatever now? If I put in the X for 'home office disposed/converted to non-business use during year' on the Home Office Ex Wkst, I get no depreciation but shouldn't it be mid-month? Or if I keep the date first used, then I get 2.564% depreciation for 16.11% area. I cannot figure out the source of that percentage.. Maybe this wasn't quite ready for prime time...My head hurts with this one. Thanks for help. Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted February 13, 2014 Report Share Posted February 13, 2014 Normally mid year disposition means no deduction That's the ACRS rule, my ancient friend!. It only applied to the equipment and furnishings anyway. MACRS uses half-year or mid-quarter convention, and mid-month for real estate. You only ignore depreciation if the property is placed in service and removed in the same year. Stop depreciation mid-month on the office, but don't calculate gain or loss. When the house is sold or foreclosed you can ignore the reconverted room. Of course accumulated depreciation reduces overall basis, but it's straight line real estate so no recapture. On the other hand, now that his computer equipment is not in an office, he might have to recapture special depreciation or Section 179 on listed property. Then you'll have even a bigger headache! Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 13, 2014 Author Report Share Posted February 13, 2014 Thanks, Mr. Pencil, for the reminder. Not the best news but sounds right. And, of course, an unhappy client with no money to pay the tax on the recaptured dpn. Quote Link to comment Share on other sites More sharing options...
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