Laurie P Posted August 2, 2007 Report Share Posted August 2, 2007 Hi all, I have a 1120-S that I am removing a vehicle (100%) and converting to personal use as of 01-01-06. I have completed the disposition worksheet and put in all the information... Before considering this, the depreciation for the year on two vehicles is $7,987.16. After the disposition the depreciation should be $6,212.16. On page one of the 1120-S the depreciation expense is still showing as $7, 987.16 and not $6,212.16. Is there something I am missing here for this not to flow right in the program? Any help would really be appreciated. I have spend 30 minutes playing with this and still am stumped. Thanks, Laurie Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted August 2, 2007 Report Share Posted August 2, 2007 Did you make sure that the 'business %' was set to zero? Quote Link to comment Share on other sites More sharing options...
Laurie P Posted August 2, 2007 Author Report Share Posted August 2, 2007 Did you make sure that the 'business %' was set to zero? OK - I did that on the disposition worksheet and it worked How dumb I feel...I see it flowed over to the K-1 & M-3 as property distributions which reduced the basis as it should. Thanks so much! Laurie Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted August 2, 2007 Report Share Posted August 2, 2007 Don't feel dumb, it is easy to overlook a simple step from time to time. Dumb would be not asking! Quote Link to comment Share on other sites More sharing options...
Laurie P Posted August 2, 2007 Author Report Share Posted August 2, 2007 Don't feel dumb, it is easy to overlook a simple step from time to time. Dumb would be not asking! KC - I take back the part to it flowing correctly.. Cost 30,600 A/D 19,973 Book value @ 01-01-06 $10,627 On the asset tab, I changed to 0% which removed the depreciation for the current year now, going over to the distribution tab...If I change to 0% the cost is gone so there is a gain. I should keep it at a 100% on this tab correct? Then, I would need to go to the K-1 (Page 3 of 1120-S) and enter the amount in the property distribution snd it will flow to the M-3. Is this correct? Thanks, Laurie Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 2, 2007 Report Share Posted August 2, 2007 You have probably done it but just to mention the fact that an asset distributed to a shareholder of an S-corp must be treated as a sale at FMV, therefore it should show up as a gain or loss on form 4797. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted August 3, 2007 Author Report Share Posted August 3, 2007 You have probably done it but just to mention the fact that an asset distributed to a shareholder of an S-corp must be treated as a sale at FMV, therefore it should show up as a gain or loss on form 4797. Hi Jack, Thanks for the post. From what I read I did not see anything regarding the 4797. Only to record the balance of the book value against distributions or that is that it will reduce the basis of the SH. I am sorry to ask so much here but this is the first time that I have done an vehicle asset conversion to personal. I want to make sure that I am handling correctly so going forward I am ok when I have it come up again. If the 4797 is to be done then am I suppose to use the "Force 4797" line on the disposition tab to do this? I guess I am confused. I selected this and the 4797 is blank... Thoughts? Laurie Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 3, 2007 Report Share Posted August 3, 2007 The personal withdrawal feature of the Asset Schedule should not be available for a form 1120S corporation. Non-recognition of gain or loss is simply not allowed. Any asset of an S-corp must be treated as sold at FMV to the shareholder and reported as such on form 4797 or Sch-D as the case may be. In the case of a vehicle, it is usual, due to depreciation, that the FMV will result in a taxable gain to the S-corp. Depreciation upto gain will normally be recaptured as ordinary income. I would not use the feature of withdrawal to personal and show it as a normal sale at FMV, then an adjusting entry to the books to charge at FMV as a property distribution. The "Force 4797 might work.. I have never done it that way. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted August 3, 2007 Author Report Share Posted August 3, 2007 The personal withdrawal feature of the Asset Schedule should not be available for a form 1120S corporation. Non-recognition of gain or loss is simply not allowed. Any asset of an S-corp must be treated as sold at FMV to the shareholder and reported as such on form 4797 or Sch-D as the case may be. In the case of a vehicle, it is usual, due to depreciation, that the FMV will result in a taxable gain to the S-corp. Depreciation upto gain will normally be recaptured as ordinary income. I would not use the feature of withdrawal to personal and show it as a normal sale at FMV, then an adjusting entry to the books to charge at FMV as a property distribution. The "Force 4797 might work.. I have never done it that way. Hi Jack, I appreciate you input. This is the 1st scenerio that I have had with a vehicle disposal so I want to make sure that I do it correctly.... The Book value $10,627 The FMV (using Edmunds) is $8,875 So, when I complete the disposition sheet, I used $8,875 as the selling price. The loss of $1,752 flowed through to the 4797 part 1 ; flowed to K-1 net section 1231 (box 9); the $8,875 would be shown as a property distribution. Is this correct? In my mind... Dr. Loss $1,752 Dr. Accum Dep $19,973 Cr. Vehicle 30,600 Dr. Distribution $8,875 I appreciate your help here.. Laurie Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 3, 2007 Report Share Posted August 3, 2007 Laurie.. I agree with your debits and credits except for possibly some depreciation for a part year if that has not already been included in accumulated depreciation to determine book value. If you handled this thru the asset disposition tab it would/should have taken a part year depreciation. The form 4797 and K-1 would appear to be correct if your FMV and book value is correct resulting in an allowable loss. Good work. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted August 3, 2007 Author Report Share Posted August 3, 2007 Laurie.. I agree with your debits and credits except for possibly some depreciation for a part year if that has not already been included in accumulated depreciation to determine book value. If you handled this thru the asset disposition tab it would/should have taken a part year depreciation. The form 4797 and K-1 would appear to be correct if your FMV and book value is correct resulting in an allowable loss. Good work. Jack, Thanks so much for your help! I am glad I am on the right track. Sometimes working on your own is great but you do not always have someone to ask. This board and few others are great and without them I could not imagine. The asset was taken off at 01-01-06 so no deprecaition expense for the current year. Again, I appreciateall your help. Laurie Quote Link to comment Share on other sites More sharing options...
OldJack Posted August 3, 2007 Report Share Posted August 3, 2007 You are certainly welcome Laurie. Good luck with your business. Quote Link to comment Share on other sites More sharing options...
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