Laurie P Posted September 12, 2007 Report Share Posted September 12, 2007 Hi all, I need a confirmation on a business gain & how to handle in ATX. S-corp which had a stolen vehicle in 2006. Replacement property purchased in January 2007. Insurance proceeds for $8,000 Section 179 taken on vehicle in 2004 so no basis. I am ok on how to calculate new basis in 2007, by question pertains to 2006 and what I need to report. Pub. 547 requires a statement to be sent to the IRS in the year in which I would have the gain & the year in which replacment property purchased. Questions: 1. In 2006, is there a statement that can be generated to provide the information needed to be sent to the IRS for the option to replace the stolen property in ATX? 2. On the disposition tab of ATX, Do I select the "casualty/loss" drop down if I am replacing? What other items should I have marked/completed on this tab or - for the situation given above what would I complete on this tab for it to calculate correctly? Form 4684 would normally be done BUT for S-corps and with a Section 179 the instructions indicate Form 4797 would be used. For my situation I do not think that either would apply because of the replacement. The instructions are not clear to me here. This is my first one like this so I really appreciate any input on where to go in ATX and make sure that I am completed the correct forms for 2006 based upon the situation. Deadline is near approaching. I look forward to any input from the group. Thanks, Laurie Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 13, 2007 Report Share Posted September 13, 2007 Since it was replaced, you do not have a 'disposition'. You just adjust the basis to reflect what happened. And you can generate a statement by using the 'Elections' form and the tab for 'Blank Statements' and type your own statement. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted September 13, 2007 Author Report Share Posted September 13, 2007 Since it was replaced, you do not have a 'disposition'. You just adjust the basis to reflect what happened. And you can generate a statement by using the 'Elections' form and the tab for 'Blank Statements' and type your own statement. Hi KC, It was replaced in 2007 so do I not need to get it off the books as of the date it was stolen? Also, I posted an additiona question on the liability on TaxPro and if I am doing the proper adjustment on the books. If you have the time could you please respond to it. I value your opinion. Sorry if this is a no brainer but I guess I just am not thinking and this is a first I have had this. I am always learning. Sometimes I wish I had someone in the same office I could bounce things off of....maybe down the road. I am so thankful for the tax boards. I hope everything is going ok for you. I said a prayer for you today. Laurie Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted September 13, 2007 Report Share Posted September 13, 2007 Knowing that they planned to replace it, I would not remove it. I am sure you could get arguments both ways, but its sort of like the situation where you have a machine that is damaged, and not usable for the second half of the year, but is in the process of being repaired. You do not take it off the depreciation schedule, and when the repair is completed, you add that cost to the basis. In this case, you know that they replaced it, so keeping it on the schedule is appropriate. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted September 13, 2007 Author Report Share Posted September 13, 2007 Knowing that they planned to replace it, I would not remove it. I am sure you could get arguments both ways, but its sort of like the situation where you have a machine that is damaged, and not usable for the second half of the year, but is in the process of being repaired. You do not take it off the depreciation schedule, and when the repair is completed, you add that cost to the basis. In this case, you know that they replaced it, so keeping it on the schedule is appropriate. KC, What should I do about the note payable sitting on the books. This was paid off by the insurance company in Dec 2006? There is a $1000+ difference between the balance and payoff which is not interest. So - I guess I am asking about what the accounting entry would be here. Db. Loan $7,432.79 Cr. Due to Shareholder 6,261.96 Cr. Gain on Asset 1,190.83 Does this look right? I really appreciate your help. Laurie Quote Link to comment Share on other sites More sharing options...
OutWestTax Posted September 13, 2007 Report Share Posted September 13, 2007 KC, What should I do about the note payable sitting on the books. This was paid off by the insurance company in Dec 2006? There is a $1000+ difference between the balance and payoff which is not interest. So - I guess I am asking about what the accounting entry would be here. Db. Loan $7,432.79 Cr. Due to Shareholder 6,261.96 Cr. Gain on Asset 1,190.83 Does this look right? I really appreciate your help. Laurie As KC said, you can handle several ways: I would do it this way assuming the insurance was received in 06. Cr Disposition of asset $8000 Dr Loan $ 7433 Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle) Dr. Accumulated Depr $ 10000 Dr. Cash $ 2567 Note that because you have a fully depreciated vehicle, you have a gain on the insurance proceeds. Makes sense, you have no casualty loss because you have zero book value = nothing to lose from a tax basis. If the vehicle is partially depreciated, then you lost the book value and the gain is reduced. Quote Link to comment Share on other sites More sharing options...
Laurie P Posted September 13, 2007 Author Report Share Posted September 13, 2007 As KC said, you can handle several ways: I would do it this way assuming the insurance was received in 06. Cr Disposition of asset $8000 Dr Loan $ 7433 Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle) Dr. Accumulated Depr $ 10000 Dr. Cash $ 2567 Note that because you have a fully depreciated vehicle, you have a gain on the insurance proceeds. Makes sense, you have no casualty loss because you have zero book value = nothing to lose from a tax basis. If the vehicle is partially depreciated, then you lost the book value and the gain is reduced. Hi Outwest, Thanks for the response. Question for you on this. The total proceeds were $14,000. Sorry if I confused you. $8,000 went directly to SH and the other $7,000 were paid directly to loan company. Do I need to consider the $7,000 loan payoff also? Thanks, Laurie Quote Link to comment Share on other sites More sharing options...
OutWestTax Posted September 13, 2007 Report Share Posted September 13, 2007 Okay that does change the entry some. Cr Disposition of asset $15000 Dr Loan $ 7000 Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle) Dr. Accumulated Depr $ 10000 Dr. Distributions $ 8000 I'm guessing the reason the payment went to the shareholder is one of those deals where they titled the vehicle in the shareholder's name rather than the corp? Sigh.... Quote Link to comment Share on other sites More sharing options...
Laurie P Posted September 13, 2007 Author Report Share Posted September 13, 2007 Okay that does change the entry some. Cr Disposition of asset $15000 Dr Loan $ 7000 Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle) Dr. Accumulated Depr $ 10000 Dr. Distributions $ 8000 I'm guessing the reason the payment went to the shareholder is one of those deals where they titled the vehicle in the shareholder's name rather than the corp? Sigh.... Hi Outwest! Thanks for the info...I will save for future. Yes - you are correct on that. Asset has been on books depreciation, etc by business since 2002 but in SH personal name. Sigh too....Talked to SH about titling over current assets. He said they will not extend credit and told him that many will as long as you personally guarentee the debt. I did mention increase possibly in insurance, etc. I see so many setup like this and trying to explain this. I finally made up an "Info Bite" on it and hand it out to applicable clients. Same with no salary and distributions with an S-corp. I see that quite a bit. Thanks for your help! Laurie Quote Link to comment Share on other sites More sharing options...
Laurie P Posted September 13, 2007 Author Report Share Posted September 13, 2007 Okay that does change the entry some. Cr Disposition of asset $15000 Dr Loan $ 7000 Cr. Vehicle $10000 ( Assuming a fully depreciated vehicle) Dr. Accumulated Depr $ 10000 Dr. Distributions $ 8000 I'm guessing the reason the payment went to the shareholder is one of those deals where they titled the vehicle in the shareholder's name rather than the corp? Sigh.... Outwest, I want to ask one more thing on this. If I have the replacement in 2007 then I guess I could deferred the gain of $15,000 and then apply to new vehicle $15,030 purchased in Jan 2007 OR record the gain this year and take the Section 179 next year. Correct? Thanks, Laurie Quote Link to comment Share on other sites More sharing options...
OutWestTax Posted September 14, 2007 Report Share Posted September 14, 2007 You could do either, but the second has the effect of accelerating taxes. Most of my clients are not interested in that. Quote Link to comment Share on other sites More sharing options...
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