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4 years into 5 year depreciation, contractor who was using…

4 years into 5 year...
4 years into 5 year depreciation, contractor who was using computer equipment my C corp owned went out of business and lost the equipment to his landlord. I'm guessing I can write off the balance, but don't think it's depreciation. What do I call the expense on my form 1120? On Balance Sheet, schedule L, do I simply reduce the value of the asset to zero?
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Customer reply replied 9 months ago
C corp, operating in California. Using quickbooks, if that matters.
Customer reply replied 9 months ago
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call.
Customer reply replied 9 months ago
Let me know if you need more information, or send me the service offer(s) so we can proceed.
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9/2/2017
PDtax
PDtax, CPA, MBA
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Customer reply replied 9 months ago
don't know quit what is happening here. I accidentally clicked the phone call button. Just want an online answer, please
I would treat it as a sale or abandonment for $0 received. 4797 the sale and claim the loss.Thanks for asking at just answer. Positive feedback is appreciated. I'mCustomer
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Customer reply replied 9 months ago
is there any issue with reclaiming past depreciation if it is sold? abandoned?
You are selling for $0, so there will be no recapture.
PDtax
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Customer reply replied 9 months ago
just reading 4797 instructions. disposal of assets. this swings corp form profit to loss. does at-risk limitation apply? "At­risk limitations (section 465). If the corporation sold or exchanged a capital asset used in an activity to which the at-risk rules apply, combine the gain or loss on the sale or exchange with the profit or loss from the activity. If the result is a net loss, complete Form 6198, At-Risk Limitations. Report any gain from the capital asset on Form 8949, Schedule D, and Form 6198."
I don't believe at risk limits your loss here. It's an entity test, and not enough info here to decide, but I wouldn't think it applies here. That is typically for loss corps and basis issues, not a lot from an asset sale that was already paid for.
Customer
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Customer reply replied 9 months ago
when you say "lot from an asset sale" do you mean "Loss from an asset sale?" remember, it wasn't a sale, but an involuntary disposition as the contractor abandoned the space where equipment was
Loss from an asset sale.There is no tax involuntary disposition that I know of. The asset was loaned out and forfeited.An involuntary conversion is a theft, fire or such where insurance pays something on the sale you did not want.I suggest a sale for $0 as the asset, or the claim against the subcobtractor who borrowed the asset, was abandoned.
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Customer reply replied 9 months ago
last dumb question... I credit the asset. What do I debit?
Debit accumulated depreciation
And debit loss on abandonment
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Customer reply replied 9 months ago
not quite last... TurboTax says I have a carry forward "non captured net Section 1231 loss". Guessing that's an asset, the equivalent of a prepay?
It's sort of an asset. 1231 sales have a lookback rule."If the result of the first netting is a loss, all casualty gains and losses for the year are considered ordinary losses. ... This netting is required by the "lookback recapture rule", which nets the current-year net Section 1231 gain against any Section 1231 ordinary loss deductions taken in the previous five years."Not applicable to your transaction, but could be in the future.
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Customer reply replied 9 months ago
do I show it as an asset on my balance sheet Schedule L?
I would not book it as an asset. It may never have value.
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