Home office issue

[Margaret CPA in OH]

Client had home office for convenience of employer. Employer ran business into the ground and stopped paying client in late 2012 but paid for his health insurance. Client was below filing requirement for 2013 so didn't file.

For 2014 he withdrew from IRA to survive. What to do about lingering home office in fixed assets? Dispose on 4797 as business no longer exists? Doesn't he have to determine recaptured depreciation when he sell his house or is that now going to show up on 4797? This would be a good year as his income is still below the filing requirement but he gets back the withheld tax.

And the weird ones continue...

[Lee B]

Hmm, I would leave on the books with a business use of .001 and if necessary you could unlink it from the 2106.

 

Other posters have suggested this in kind of similar circumstances.

[kcjenkins]

"Abandoned or converted to personal use" would be my choice.

[Margaret CPA in OH]

Thanks, I'll look at that although I thought it had to be linked to something. We shall see. As the business no longer exists and he is jobless and apparently not looking (wondering why no unemployment), it's hard to see the future.

[Pacun]

Transfer it to Personal use and print out all depreciation sheets and put it with his copies. If your computer dies, (which I hope NOT, but you never know) he will have the documents he will need with he settles the house by sale or inheritance. Am I too negative today?

[jklcpa]

I would also choose to convert it to personal use.  I think, but not entirely sure on this, but I think converting to personal use won't trigger the depreciation recapture until the home is sold.  That would be my choice as well because that is what has happened.   If you change the business use to that .001 as cbslee suggested, that would trigger the recapture because the business use fell below 50%.

[Margaret CPA in OH]

Thanks again, folks. I will look at both and talk with the client. My guess is that recapture would be better now with such low income rather than trying to keep track (and I wonder how many actually do over the years) for future sale.