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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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I am doing a tax return for a client and want to be sure I

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I am doing a tax return for a client and want to be sure I handle the disposition of an asset correctly. Would love to get some expert advice so I don't mess this up. Client was financing equipment for their business (s-corp) through Caterpillar Financing. They have been taking depreciation deduction since 2006. They let the equipment go back to finance comp in 2008 but prior accountant did not report this on tax return in 2008.    1. Is this something that needs to be reported on Form 4797? There was not a "sale" so I'm not sure about this. Assume we need to recapture depreciation, correct?    Or maybe not since there is not a gain on sale since there was not a sale.  2. I'm assuming we would need to go back and amend 2008, correct? Thanks for any guidance.

Hi rd and welcome to JustAnswer:


It is a disposal of equipment. The proceeds is the note balance they did not repay when they gave the equipment back to Caterpillar. It should properly be reported on Form 4797 on the 2008 return.

Customer: replied 5 years ago.
So walk me through how this gets put onto the 4797...............

Initial purchase of equipment $147,000
Depreciation taken $90,000

Amt left on note $50,000

proceeds $50,000 basis $147,000, depn $90,000, net book value $57,000. Ordinary loss $7,000.
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